Gardner Intelligence Blog

Durable Goods Spending Grows at Fastest Rate Since 2018

In September, the month-over-month rate of growth for durable goods spending was 5.7%, which was the fastest rate of growth since August 2018. Additionally, it was the first month since August 2018 in which the rate of growth was above the historical average. The accelerating rate of growth was likely the result of the falling change in the real 10-year Treasury rate. Because the 10-year rate itself has dropped so low, durable goods spending is making up its largest share of all consumer spending ever.

The annual rate of growth was unchanged at 4.2%. This was the slowest annual rate of growth since September 2010, but with the recent month-over-month growth in durable goods spending and the declining year-over-year change in the 10-year Treasury rate , there could be some modest acceleration in the annual rate of growth heading into the fourth quarter.

Income Growth Accelerates for Second-Straight Month

In September 2019, real disposable income was $15,136 billion, which was its highest level ever. The month-over-month rate of growth was 3.5%, which was up significantly from 3.1% in August and the fastest growth since December 2018. September was the second consecutive month of accelerating growth.

The annual rate of growth remained at 3.4%, which was its slowest rate of growth since March 2018. Additionally, it was down from its peak rate of growth of 4.0% in December 2018. While the month-over-month rate of growth has accelerated, it probably has not accelerated enough for the annual rate of growth in disposable income to grow faster in the months ahead.

The Gardner Business Index (GBI) ended October at 48.3, signaling a fourth month of mildly contracting business activity across the U.S. manufacturing sector. 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 supported by expanding activity in supplier deliveries, new orders and employment.  As in recent months, production continued to register very closely around the 50 mark.  Weighing on the Index were backlogs and exports. Both experienced quickening contraction, and both measures set new multi-year lows in October.

Based on a three-month moving average, the best performing end-market as of October was aerospace, an industry which has been consistently and strongly expanding since 2016.  It was followed by medical equipment manufacturing which has seen its business activity levels expand significantly during the third-quarter of 2019.  Conversely, the market for construction machinery continued to experience the fastest rate of contracting business activity among the 24 end markets Gardner monitors.  This decline has been mirrored by a similarly enduring contraction in the industrial motors market.

According to PlasticsEurope’s research, the European plastics production market will decrease in 2019 for a second consecutive year. As Europe’s plastics industry dims further in the 2019/2020 period, more of the world’s processors will compete where opportunities abound. This will elevate plastics competition in the U.S.

“Plastics manufacturers are suffering from weak economic development not only in Europe, but also worldwide,” according to PlasticsEurope Regional Director Dr. Rüdiger Baunermann. “Economic development has lost considerable momentum, and important customer industries are showing weak to clearly negative growth rates.” While the contraction in Europe is ongoing, it contrasts considerably with Gardner Intelligence’s data on the U.S. plastics industry.

Housing Permits Grow at Faster Rate since March 2017

There were 114,300 housing permits filed in September 2019. The month-over-month change in permits was 15.0%, growing at an accelerating rate for the third-straight month. September’s rate of month-over-month growth was the fastest since March 2017.

In September, the annual rate of change grew 0.6%, ending four-straight months of contraction. The annual rate of growth will continue to accelerate in the months ahead as the three-month rate of change was 9.6% in September.

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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.