Gardner Intelligence Blog

Income Growth Below Average for Second Month

In August 2019, real disposable income was $15,073 billion, which was its highest level ever by quite a bit. However, the month-over-month rate of growth was 3.0%, which is slower than the historic average, for the second month in a row. Also, it was the slowest rate of growth since April 2017 and the first month. In 2019, the month-over-month rate of growth has been notably slower than it was in 2018.

The annual rate of growth remained decelerated to 3.4%, which was its slowest rate of growth since March 2018. Also, it was down from its peak rate of growth of 4.0% in December 2018. With noticeably slower month-over-month growth since the beginning of the year , it is likely that the annual rate of growth in disposable income will decelerate more in the months ahead.

Housing Permits Grow for Second Consecutive Month

There were 127,000 housing permits filed in August 2019. This was the most permits filed since June 2017 and the second most permits filed since June 2015. Additionally, the month-over-month change in permits grew 8.6%, increasing for the second straight month after six months in a row of contraction. August’s rate of month-over-month growth was the fastest since July 2018.

In August, the annual rate of change contracted at a decelerating rate after contracting faster each of the previous three months. The current rate of annual contraction is just -0.8%, and it should improve in the upcoming months based on the growth in permits the last two months.

Cutting Tool Orders Contract for Fifth Month

In July, cutting tool orders were $198.4 million, which was the second month in a row that orders were below $200 million. July orders contracted by 3.5% compared with one year ago, which was the fifth consecutive month of month-over-month contraction. The annual rate of growth decelerated for the sixth-straight month to 4.0%, which was the slowest rate of annual growth since June 2017. It is very likely that the annual rate of change in cutting orders will slide into contraction before the end of 2019.

The GBI: Metalworking is a good leading indicator of cutting tool orders. The rate of change in the Index began contracting in March and the contraction has accelerated since. In the last down turn in late 2015 and early 2016, the GBI: Metalworking contracted more than 10% year over year and so did cutting tool orders. It is likely that the GBI: Metalworking will see annual contraction of at least 10% in the next few months. The Index is clearly indicating that the annual rate of growth in cutting tool orders will continue to decelerate, if not begin to contract, for the remainder of 2019. The GBI typically leads cutting tool orders by seven-to-10 months.

Durable Goods Production Second Highest Level Ever

In August, the index for production of durable goods was 110.2, which was its second highest level ever (only June 2019 was higher). Production grew month-over-month for the 33rd consecutive month. However, compared with one year ago, durable goods production grew just 0.6%, which was the second slowest rate of month-over-month growth since November 2016 when production was coming out of a period of contraction. 

In three of the last six months, the durable goods production index was above 110 (it’s only been above 110 one other time). However, the annual rate of growth, which is easier to correlate with other data points, decelerated to 2.3%, down from a peak growth rate of 3.5% in February. August’s growth rate was the slowest since December 2017. The annual rate of growth is likely to decelerate even more as the month-over-month rate of growth has been relatively weak the last six months. Further, the key leading indicator of production – durable goods new orders – is indicating slower growth in industrial production.

Reports

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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.

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