Gardner Intelligence Blog

Machine Tool Orders Slide in January

January machine tool orders were 1,580 units and $262,793,000.

January’s unit orders were the lowest since January 2017. Orders for the month contracted 30.3% compared with year ago, which was the fastest one-month rate of contraction this cycle. This was the seventh month in a row of contraction and the eighth in the last nine. The annual rate of contraction decelerated to -14.0% from -10.9% this month.

Capacity Utilization Contracting at a Slower Rate

In February, durable goods capacity utilization was 74.7%, which was the second lowest rate of capacity utilization since September 2017. Compared with one year ago, capacity utilization contracted 2.0%. This was the ninth month in a row and the 10th of the last 11 months that capacity utilization contracted. However, the the month-over-month rate of contraction has decelerated since the peak rate of contraction in October 2019.

The annual change in durable goods capacity utilization contracted at an accelerating rate for the fourth month in a row, falling to -1.4% from -1.2%. February was the fastest rate of annual contraction since March 2017. As the annual rate of change tends to lead capital equipment consumption by seven-to-10 months, capacity utilization is signaling accelerating contraction in capital equipment spending through at least the first half of 2020.

Feb. '20 Durable Goods Production Highest in Three Months

In February, the index for production of durable goods was 108.1, which was the highest level since November 2019. Compared with one year ago, the index contracted 0.3%, which was the sixth straight month of contraction. However, February’s contraction was the second slowest of the six.

The annual rate of change, which is easier to correlate with other data points, grew 0.1% this month. The annual rate of growth decelerated for the 12th straight month. February’s growth rate was the slowest since April 2017, which was the last time the annual rate of change contracted. However, the key leading indicator of production—durable goods new orders—is indicating contraction in production.

During the week of March 9th, Gardner Intelligence conducted for the second time a short survey to gauge the effects of COVID-19 on discrete parts manufacturers across all the industries that Gardner Business Media covers. The survey asked two basic questions:

For each of those questions, respondents were asked to rank the severity of the change or adjustment from minimal to moderate to major.

In February, the nominal 10-year Treasury rate was 1.50%, which was the lowest monthly average for the 10-year Treasury rate ever. Of course, the nominal rate was nearly 100 basis points (about 0.50%) in the early days of March). At the same time, inflation, according to the CPI, was above 2% for the fourth consecutive month and increasing at its second fastest rate since October 2018.

The combination of the falling nominal 10-year Treasury rate and the rising rate of inflation pushed the change in the real 10-year Treasury rate to -0.80%. This was the lowest level for the year-over-change since  December 2016. Also, it was the 14th month in a row that the change was negative.

Reports

Top Shops

‘Top Shops’ is a benchmarking and recognition program designed to help shops build their business.

World Machine Tool Survey

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

Capital Spending Survey

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.