Gardner Intelligence Blog

Durable Goods Spending Grows Modestly

In November, the month-over-month rate of growth for durable goods spending was 4.8%, which showed decelerating growth for the second-straight month. Additionally, the month-over-month rate of growth was below average for every month but one since August 2018. 

The annual rate of growth was unchanged at 4.2%, the slowest annual rate of growth since September 2010. However, because of declining change in the real 10-year Treasury rate and the somewhat faster month-over-month growth compared with 6-12 months ago, there could be some modest acceleration in the annual rate of growth heading into 2020.

November Income Growth at Historical Average

In November 2019, real disposable income was $15,133 billion, which was an all-time high. The month-over-month rate of growth was 3.1%, which was right at the historical average. Additionally, this was the second time in three months that the rate of growth was at or above the historical average, indicating that annual income growth may be near a bottom and ready to accelerate. 

The annual rate of growth was unchanged at 3.2%, which was its slowest rate of growth since January 2018. It was also down from its peak rate of growth of 4.0% in December 2018.

The Gardner Business Index (GBI) closed 2019 at 47.8, indicating a slightly faster pace of contracting business conditions as compared to November. Index readings above 50 indicate expanding activity while values below 50 indicate contracting activity. The further away a reading is from 50 the greater the magnitude of activity change. Gardner Intelligence’s review of the underlying data for the month observed that the Index – calculated as an average of its components – was lifted by expanding activity in supplier deliveries and modestly contracting activity in new orders, employment and exports. The Index was pulled lower by production and backlog readings which reported quickening contraction.

Among the over 20 end markets tracked by Gardner, five stood out during 2019. The fastest growing industry was aerospace followed by medical manufacturing.  At the close of 2019, three other end-market continued to signal modest expansionary growth based on the 3-month moving average of their monthly readings. Those were petroleum processing, power generation and electronics manufacturing. Nearly all other end-markets tracked by Gardner started off 2019 reporting expansionary growth yet faltered at some point during the second half of the year. Among those experiencing the greatest contraction at year-end were pumps, construction machinery and custom processors.

Housing Permits Grow for Fifth Month

There were 107,500 housing permits filed in November 2019. This was the lowest level for housing permits since March 2019. However, permits in November 2019 were 6.4% higher than they were in November 2018. Therefore, November was the fifth consecutive month of growth in housing permits.

In November, the annual rate of change accelerated to 2.4%, which made it the third-straight month of accelerating growth. The annual rate of growth will likely continue to accelerate in the months ahead, as the three-month rate of change was faster than 13% for the second month in a row.

Cutting Tool Orders Highest in 12 Months

In October, real cutting tool orders were $216.3 million, which was the second time in three months that orders were above $200 million. Additionally, this was the highest level for cutting tool orders since October 2018. However, compared with one year ago, cutting tool orders contracted -5.0%, which marked the eighth consecutive month of month-over-month contraction. Additionally, the annual rate of change switched to accelerating contraction from decelerating growth. This was the first month of annual contraction since April 2017. 

The GBI: Metalworking is a good leading indicator of cutting tool orders. The annual rate of change in the Index has contracted for nine-straight months. In the last downturn in late 2015 and early 2016, the GBI: Metalworking contracted more than 10%, year over year, as did cutting tool orders. In November, the GBI: Metalworking showed annual contraction of 11.8%. The Index is clearly indicating that the annual rate of change in cutting tool orders will contract for the remainder of 2019 and into 2020. The GBI typically leads cutting tool orders by seven-to-10 months.

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An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.

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An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more.

Gardner Business Index

A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.