Real disposable income grew month-over-month for the first time since March. However, this was not enough to change the decelerating growth trend in the annual rate of change, which is indicating that consumer spending will hit its peak rate of growth in late 2021 or early 2022.
The month-over-month rate of growth in consumer durable goods spending grew at its slowest rate since May 2020. A significant reason for this is a 6.1% contraction in motor vehicle and parts spending as the industry is beset with supply chain disruptions.
The pace of growth in the money supply has been extraordinary since the lockdowns in March 2020. August was the 21st consecutive month of month-over-month growth. And, it was the 16th in the last 17 months with growth faster than 20%. Typically, this leads to growth in capital equipment consumption.
Compared with one year ago, durable goods new orders grew 13% in August. That’s five of the last six months with double-digit growth. Given the strong growth in durable goods consumer spending, new orders should see accelerating growth for at least another three months.
The real 10-year Treasury rate was -4.02% thanks to an increase in the rate of inflation. The extremely low real rate means that the annual change in the rate was quite negative in September, which typically leads to stronger capital equipment investment.
The annual rate of change in the GBI: Metalworking grew at an accelerating rate for the seventh consecutive month, indicating that the annual rate of contraction in cutting tool orders will continue to decelerate throughout 2021 as cutting tool orders continue to improve on a month-by-month basis.
The annual rate of change in the GBI: Metalworking grew 27.1% in September, which was the seventh straight month of accelerating growth. The strong growth in the metalworking industry should lead to accelerating growth in machine tool orders throughout 2021.
Business Expansion Slowed Through Third Quarter
The year-over-year change in the real 10-year Treasury, now -331 basis points, was slightly less negative for the second month in a row. However, the change was still quite negative and indicating further expansion in manufacturing.
The growth of e-commerce sales and new business formations in the digital retail sector will provide an enduring support base for the packaging industry’s bright future.
The key leading indicator of production – durable goods new orders – grew at an accelerating annual rate for the third consecutive month. Durable goods new orders are indicating that production should see accelerating growth in the second half of 2021 and possibly into 2022.
Banking data signal rising demand from companies for credit. This may support ancedotal evidence that a rising proportion of firms are struggling with limited working capital.
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