The year-over-year change in the real 10-year Treasury rate is virtually the most negative it has been since the summer of 2008. This is indicating that the slow growth in housing permits in July could be temporary.
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The GBI registered slowing growth in July with a 60.8 reading, down about 2-points from June. Larger companies have reported better business conditions thus far in 2021. Conversely, firms under 50 and in particular those under 20 employees in size have been less optimistic about business conditions.
The GBI: Metalworking backlog index grew for the fifth month in a row, indicating that durable goods capacity utilization should see accelerating growth for the remainder of 2021 and into 2022.
Despite falling to its lowest level since February, the durable goods production index grew for the fifth month in a row compared with one year ago. Three months of accelerating growth in the annual rate of change indicate that capital equipment consumption will accelerate into 2022.
A sharp decline in the year-over-year change in real 10-year Treasury rates due to accelerating inflation indicates strong capital equipment spending for the remainder of 2021 and possibly into 2022.
Five-Axis and Micro-machining continue to report an accelerating expansion of business activity while the broader Gardner Business Index has registered more consistent expansionary growth.
The GBI: Metalworking is growing at its fastest rate since December 2010. The rapid growth in the metalworking industry should lead to accelerating growth in machine tool orders throughout 2021.
June was the fourth straight month that new orders increased more than 27%. Of course, this very strong growth rate in June was somewhat affected by slightly lower than normal new orders in June 2020 due to the economic lockdown.
Business Activity Impacted by Slowing Expansion in New Orders
Despite an increase in nominal disposable income from one year ago, real disposable income decreased as inflation rapidly accelerated during the last year. Also, the government stimulus was not as strong this June as one year ago.
Durable goods spending in June 2021 was quite strong. In the last 13 months, month-over-month growth was more than 10% every month. And, the annual rate of growth was just 0.1% slower than the all-time high in May 2021.
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