Gardner Intelligence Blog

Production Growth Continues Trend for Fourth Month

In December, the Index for production of durable goods was 106.0, which was the third lowest level for the index in 2019. Compared with one year ago, the index contracted 1.0%, which was the fourth straight month of contraction.

The annual rate of change, which is easier to correlate with other data points, grew 0.7% this month. However, the annual rate of growth decelerated for the 10th​​​​-straight month. December’s growth rate was the slowest since June 2017, and it is likely to decelerate even more, as the month-over-month rate of growth has been relatively weak the last nine months. Further, the key leading indicator of production – durable goods new orders – is indicating slower growth in industrial production.

Capacity Utilization for Durable Goods Contracts in December

In December, durable goods capacity utilization was 75.2%, which was slightly below the average utilization for 2019. However, compared with one year ago, capacity utilization contracted 2.9%. This was the seventh month in a row and the eighth of last the nine months that capacity utilization contracted. Additionally, December’s month-over-month contraction was the second-fastest since August 2016.

The annual change in durable goods capacity utilization contracted at an accelerating rate for the second month in a row, falling from -0.2% to -0.7%. December was the fastest rate of annual contraction since May 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.

Machine Tool Orders Fall, Lining Up with GBI Predictions

November machine tool orders were 1,853 units and $305,720,000.

Unit orders were under 2,000 – the mark of a healthy machine tool market – for the fifth time in seven months. Orders for the month contracted 26.8% compared with one year ago, marking contraction for the 10th-​​​​​​straight month and 11 of the last 12 months. This was the fourth-straight month with more than 25% month-over-month contraction. The annual rate of contraction, 15.1%, accelerated for the fourth month in a row and contracted at its fastest rate since August 2016.

Change in 10-Year Treasury Supports Spending and Investment

In December, the nominal 10-year Treasury rate was 1.86%. While this was the highest rate since July, it was also the fifth month in a row the nominal rate was less than 2.00%. At the same time, inflation reached its highest annual rate since October 2018 and kept the real 10-year Treasury rate near its lowest rate in six years. In November, the real rate was just 0.05%.

In November, the year-over-year change in the real 10-year Treasury rate was -0.33%, which was the 12th consecutive month the change was negative. 

Durable Goods Orders Continue to Slide

New orders for real durable goods totaled $230,444 million in November, which was the lowest level of durable goods new orders since January 2018. Orders in November 2019 were down 7.6% from one year ago, marking the fastest rate of month-over-month contraction since July 2016. Also, this was the fourth month in a row of contraction and the ninth month of contraction out of the last 10. Three of the last four months have contracted faster than 6.0%. The result was that the annual rate of change contracted 3.4%, moving at a faster rate of contraction for the fourth-straight month. This was the fastest rate of annual contraction since July 2016.

Compared with one year ago, new orders for motor vehicles and parts contracted 6.9%. This was the fourth consecutive month of month-over-month contraction and the fastest rate of contraction since July 2016. The annual rate of growth, now 1.3%, decelerated for the fifth month. This was the slowest rate of annual growth since March 2018.


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.