Gardner Intelligence Blog

Lowest March Machine Tool Orders Since 2010

Lowest March Machine Tool Orders Since 2010

March machine tool orders were 1,627 units and $298,584,000.

March’s unit orders were the lowest total for March since 2010. Orders for the month contracted 32.5% compared with a year ago. This was the ninth month in a row of contraction and the seventh in the last eight with a rate of contraction faster than 20%. The annual rate of contraction accelerated for the third month in a row to -17.5%. This was the fastest rate of annual contraction since May 2010.

Is the Monetary Base Pointing Toward Higher Capital Spending?

In April, the monetary base was $4.885 trillion, which was its highest level ever by nearly $800 billion, or 20% more than the previous all-time high in August 2014. April’s monetary base was $1.4 trillion than it was just two months prior in February. Compared with one year ago, the monetary base increased 47.4%, which was the fastest rate of month-over-month growth since October 2009. This was the fifth month in a row of month-over-month accelerating growth.

The annual rate of change was 0.0% in April, ending 18 months of contraction. Historically, the annual rate of change in the monetary base leads capital equipment consumption, specifically machine tool consumption, by 12-18 months. The lead time between the monetary base and capital equipment consumption shrunk over the last decade. However, the lead time may lengthen again as the money being created may not make its way to capital equipment spending as quickly if the economy remains slow for an extended period of time and banks are reluctant to lend.

Using High Frequency Data for Making Data-Driven Decisions

Gardner Intelligence is firmly committed to helping the manufacturing community in any way possible, including by sharing data from other sources.  To help business-owners and decision makers as they navigate through this challenging time we therefore are recommending to our readers the Federal Reserve’s Weekly Economic Index (WEI). The WEI is a short-term indicator that provides excellent data for rapidly-changing economic activities, such as we find in the current COVID-19 pandemic.

As described by the Federal Reserve, the WEI is “...a composite of 10 weekly economic indicators: Redbook same-store sales, Rasmussen Consumer Index, new claims for unemployment insurance, continued claims for unemployment insurance, adjusted income/employment tax withholdings (from Booth Financial Consulting), railroad traffic originated (from the Association of American Railroads), the American Staffing Association Staffing Index, steel production, wholesale sales of gasoline, diesel, and jet fuel, and weekly average US electricity load (with remaining data supplied by Haver Analytics). All series are represented as year-over-year percentage changes. These series are combined into a single index of weekly economic activity.”

Durable Goods Orders Drop 16% in March

Durable Goods Orders Drop 16% in March

New orders for real durable goods totaled $237,313 million in March, which was down 15.9% from one year ago. March was the 12th month of contraction in the last 14. And, it was the fastest rate of month-over-month rate of contraction since October 2009. 

The result was that the annual rate of change contracted 5.3%, which was the fastest rate of annual contraction since March 2016. The sharp deceleration in growth in consumer durable goods spending in March and likely in April means that durable goods new orders will continue to contract faster. 

Durable Goods Spending Contracts Most Since Great Recession

In March, real consumer durable goods dropped to its lowest level since February 2017. The month-over-month rate of contraction for durable goods spending was -11.2%, which was the fastest rate of contraction since April 2009. 

The annual rate of growth decelerated for the first time since August 2019, decelerating to the slowest rate of growth since November 2019. However, the real 10-year Treasury rate is falling at its fastest year-over-year rate since late 2012. The question is will lower interest rates be enough to overcome lower incomes?

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.