Gardner Intelligence Blog

December Income Grows at Slowest Rate Since January 2017

In December 2019, real disposable income was $15,107 billion, which was lower than two of the last three months. This is an unusual occurence in real disposable income. The month-over-month rate of growth was 2.0%, which was the slowest rate of growth since January 2017 and a substantially lower rate of growth than most of the last three years.

The annual rate of growth decelerated to 3.0%, which was its slowest rate of growth since December 2017. It was also down from its peak rate of growth of 4.0% in December 2018. Based on the one-month and three-month rates of change, the annual rate of growth will continue to decelerate in early 2020.

The Gardner Business Index (GBI) moved higher in the first month of 2020 to close at 49.6. By comparison, a reading of exactly 50 would have implied no change in total business activity. Therefore, January’s number indicates that business conditions contracted only very slightly for the month.

January’s reading is encouraging for several reasons. Foremost, it ends a five-month trend of accelerating contraction in activity. Secondly, it represents the highest Index reading since June of 2019. 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.

Possible Turning Point in Cutting Tool Orders in 2020

In November, real cutting tool orders were $189.1 million, which was the lowest level for cutting tool orders since January 2018. Compared with one year ago, cutting tool orders contracted -11.3%, which marked the ninth consecutive month of month-over-month contraction. Additionally, this was the fastest rate of month-over-month contraction since July 2016. The annual rate of change also contracted at an accelerating rate for the second month. 

The GBI: Metalworking is a good leading indicator of cutting tool orders and leads cutting tool orders by seven-to-10 months. The annual rate of change in the Index has contracted for 10-straight months, clearly indicating that the annual rate of change in cutting tool orders will continue to accelerate. However, the GBI rate of change does appear to be in the initial stages of a turn. If it bottoms in the first quarter of 2020, then it would be expected that the rate of change in cutting tool orders would bottom around the summer of 2020.

Housing Permits Up 12.5% in December

There were 107,300 housing permits filed in December 2019. This was the lowest level for housing permits since March 2019. However, permits in December 2019 were up 12.5% compared with one year ago. Therefore, December was the sixth consecutive month of growth in housing permits. Also, this was the third month in the last four that housing permits increased more than 12%.

In December, the annual rate of change accelerated to 3.1%, which made it the fourth-straight month of accelerating growth. This was the fastest rate of annual growth since January 2019. The annual rate of growth will likely continue to accelerate in the months ahead, as the three-month rate of change was faster than 12% for the third month in a row.

Monetary Base Grows for First Time Since February 2018

In December, the monetary base was $3.427 trillion, which was its highest level since November 2018. This was the first month of month-over-month growth since February 2018, which is a positive sign for capital equipment consumption.

The annual rate of contraction in the money supply, -9.3%, decelerated for second month in a row, which also is positive sign for capital equipment consumption. It seems very likely that the rate of contraction in the money supply has bottomed. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.

Reports

Top Shops

‘Top Shops’ is a benchmarking and recognition program designed to help shops build their business.

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.