Gardner Intelligence Blog

Income Growth Accelerates in September

Income Growth Accelerates in September

In September, real disposable income was $15,750 billion. While this was slightly higher than last month, September income was lower than April through July. This is extremely unusual historically, but it is a direct result of the initial round of stimulus checks and extended unemployment benefits during the early months of the pandemic. Also, September income was 5.5% more than one year ago, which was significantly faster month-over-month growth than the historic average. All of the above is still largely due to government transfer payments such as expanded unemployment insurance and government stimulus checks. 

The annual rate of growth accelerated to 5.3%. This was the fastest rate of annual growth since March 1999. Normally, this kind of acceleration would lead to a dramatic increase in consumer spending. While the increased government transfer payments may have helped support consumer spending in the near term, the question is what happens to consumer spending when those payments end?

September Durable Goods Spending Grows 14.3%

September Durable Goods Spending Grows 14.3%

In September, real consumer durable goods spending was $2,066,003, which is an all-time high for the fourth consecutive month. The month-over-month rate of growth for durable goods spending was 14.3%, which was the fastest rate of month-over-month growth since February 2004. Also, it was the fourth straight month with faster than 11% growth, which was the first time that has happened since the summer of 1999 in the middle of the dot com bubble.

The annual rate of growth accelerated for the fourth straight month to 4.8%. The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was -0.76%. This was the ninth consecutive month and 12th of the last 14 that the real rate was negative. So far, lower interest rates combined with increased government transfer payments and the stock market near all-time highs have been enough to significantly boost durable goods spending. In fact, durable goods spending is 15.8% of total consumer spending, which is its highest percentage of all consumer spending ever. The question is, will that continue when government transfer payments run out?

Durable Goods Orders Contracting Slower in September

Durable Goods Orders Contracting Slower in September

New orders for real durable goods totaled $248,680 million in September. This was 1.2% less than one year ago and the slowest rate of contraction since July 2019. 

The result was that the annual rate of change contracted 9.4%, which was the first month of decelerating contraction this cycle. Consumer durable goods spending is growing extremely fast and indicating a bottom in the rate of contraction in durable goods new orders has occurred. 

GBI: Metalworking Indicating a Bottom in Cutting Tool Orders Ahead

In August 2020, real cutting tool orders were $136.1 million, which was the lowest order total since orders began to be reported in January 2012. Compared with one year ago, cutting tool orders contracted -34.1%, which was the 18th consecutive month of month-over-month contraction. August was the fourth time in five months with a month-over-month rate of contraction faster than 30%.

The annual rate of change contracted at an accelerating rate for the 11th month. The annual rate of contraction was 17.9%, which was the fastest rate of annual contraction since the data was made public. At the beginning of 2020, the Gardner Business Index: Metalworking indicated that the annual rate of contraction in cutting tool orders would bottom out in the summer of 2020. However, the pandemic accelerated the contraction in metalworking and extended the accelerating contraction in cutting tool orders.

Money Supply Growth Accelerates

Money Supply Growth Accelerates

In September, the monetary base was $4.880 trillion, which was an increase from the previous month for the second month in a row. Compared with one year ago, September’s monetary base was up 52.4%, which was the third fastest rate of growth since October 2009. This was the sixth consecutive month that the month-over-month rate of change was faster than 44%. (In 2009, the monetary base increased more than 100% five times in the first eight months of the year.) This was the 10th month in a row of month-over-month growth. The annual rate of growth accelerated to 25.3% in September, which was the sixth straight month of accelerating growth and the fastest rate of growth since October 2014.

Historically, the annual rate of change in the monetary base leads capital equipment consumption, specifically machine tool orders, by 12-18 months. Although, the lead time between the monetary base and capital equipment consumption shrunk over the last decade. 

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.