Gardner Intelligence Blog

Monetary Base Shows Positive Sign for Manufacturing

In November, the monetary base was $3.334 trillion, which was its highest level since March 2019. While it was the 21st consecutive month of month-over-month contraction in the monetary base, November’s rate of month-over-month contraction, -4.6%, was the slowest since July 2018. Additionally, it was the fourth time in five months that the rate of contraction was slower than 10%. 

The annual rate of contraction in the money supply, -10.3%, decelerated for the first time since it began contracting in October 2018. It seems likely that the rate of contraction in the money supply has bottomed, which would be a positive sign for capital equipment consumption. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.

Aerospace Orders Increase Amid Durable Goods Contraction

New orders for real durable goods totaled $252,945 million in October, which was down 2.9% from one year ago. This was the third consecutive month that new orders contracted. Additionally, durable goods new orders contracted for the eighth time in nine months. The result was that the annual rate of change contracted 2.6%, moving at a faster rate of contraction for the third-straight month.

Compared with one year ago, new orders for motor vehicles and parts contracted 6.5%. This was the third consecutive month of month-over-month contraction and the fastest rate of contraction since July 2016. The annual rate of growth, now 2.4%, decelerated for the fourth month. This was the slowest rate of annual growth since June 2018.

The Gardner Business Index (GBI) moved lower in November to 48.0, indicating a quickening contraction in business activity among U.S. manufacturers. 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 new orders, supplier deliveries, employment and production.  Conversely, backlogs and exports both pulled the Index lower, with backlog activity contracting at its fastest rate in over three years.

Based on three-month moving averages, the fastest expanding manufacturing market was aerospace, followed by medical and electronics.  In the year-to-date period, aerospace and medical manufacturing data have to a quickening expansion trend.  Electronics manufacturing by comparison contracted during the first half of 2019 before reversing course and expanding in recent months.

Durable Goods Spending Growth Back Below Historic Average

In October, the month-over-month rate of growth for durable goods spending was 5.2%, which was significantly slower than last month. Additionally, the month-over-month rate of growth fell back below the long-term average growth rate. However, growth has been somewhat stronger the last four months than it was around the turn of the year due to the falling change in the real 10-year Treasury rate.

The annual rate of growth was unchanged at 4.3%. This was virtually 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.

October Income Growth Slows

In October 2019, real disposable income was $15,066 billion, which was slightly lower than the previous month’s income level. The month-over-month rate of growth was 2.8%, which was significantly slower growth than in September. Additionally, income growth was below 3.0% for the fourth time in five months. 

The annual rate of growth decelerated to 3.2%, which was its slowest rate of growth since January 2018. Additionally, it was down from its peak rate of growth of 4.0% in December 2018. The slower month-over-month growth, as well as quarter-over-quarter growth, indicates that the annual rate of growth will continue to decelerate in the months ahead.


Top Shops

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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.