Gardner Intelligence Blog

In January, 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 2.4%. This was the eighth month in a row and the ninth of the last 10 months that capacity utilization contracted. 

The annual change in durable goods capacity utilization contracted at an accelerating rate for the third month in a row, falling from -0.7% to -1.1%. December was the fastest rate of annual contraction since April 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.

Production Growth Slower for 11th Month

In January, the Index for production of durable goods was 105.0, which was the third lowest level for the index since July 2019. Compared with one year ago, the index contracted 0.9%, which was the fifth straight month of contraction.

The annual rate of change, which is easier to correlate with other data points, grew 0.3% this month. The annual rate of growth decelerated for the 11th straight month. December’s growth rate was the slowest since May 2017, and it is likely to contract in the next month or two. Further, the key leading indicator of productiondurable goods new ordersis indicating contraction in production.

Machine Tool Unit Orders Show Improvement in December

December machine tool orders were 2,253 units and $397,555,000.

December’s unit orders were the highest since March 2019. On top of this, unit orders going back to December 2018 were revised upward a significant amount. This revision occurred mostly in the West and the month of August in the Southeast.

Durable Goods Orders Contract Faster

New orders for real durable goods totaled $247,645 million in December, which was down 5.2% from one year ago. Additionally, this was the fifth-straight month of contraction and the 10th month of contraction out of the last 11. The result was that the annual rate of change contracted 3.9%, moving at a faster rate of contraction for the fifth-straight month. This was the fastest rate of annual contraction since June 2016. However, durable goods orders should bottom out soon as consumer durable goods spending started growing at an accelerating rate in December.

Compared with one year ago, new orders for motor vehicles and parts contracted 4.5%. This was the fifth consecutive month of month-over-month contraction. The annual rate of growth, now 0.3%, decelerated for the sixth month. This was the slowest rate of annual growth since January 2018.

Durable Goods Spending Grows 8.0% in December

In December, the month-over-month rate of growth for durable goods spending was 7.9%, which was the fastest rate of growth since May 2018. This was just the second month of faster than average growth since July 2018.

The annual rate of growth accelerated significantly to 4.7%. This was the fastest rate since April 2019. Because the real 10-year Treasury rate declined in 2019, and because of the acceleration in quarterly growth, there should be further accelerating growth in the first quarter of 2020.


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.