Gardner Intelligence Blog

Trend in 10-Year Treasury Rate Positive for Future Spending

In June, the nominal 10-year Treasury rate was 0.73%, which was the fourth month in a row and the fourth month ever that the monthly average was below 1%. So, the nominal 10-year Treasury rate has hovered near its all-time lows for four straight months.

The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was -0.84%. This was the sixth consecutive month and ninth of the last 11 that the real rate was negative. Inflation was relatively low from April to June compared with the previous four years. However, inflation did pick up significantly in June.

May Machine Tool Orders Remain at Low Level

May Machine Tool Orders Remain at Low Level

May machine tool orders were 1,507 units and $212,664,000.

May’s unit orders improve slightly from April’s lowest monthly total since May 2010. Orders for the month contracted 26.6% compared with a year ago, which was the eighth time in 10 months that unit orders contracted more than 20%. Also, this was the 11th month in a row of contraction. The annual rate of contraction accelerated for the fifth month in a row to -20.4%. This was the fastest rate of annual contraction since May 2010.

Money Supply Increases More Than 50% for Second Month

Money Supply Increases More Than 50% for Second Month

In June, the monetary base was $5.002 trillion, which was slightly lower than last month. However, compared with one year ago, June’s monetary base was up 52.7%. Therefore, the one-month rate of change was more than 50% for the second month in a row. (In 2009, the monetary base increased more than 100% five times in the first eight months of the year.) This was the seventh month in a row of month-over-month growth. The annual rate of growth accelerated to 10.9% in June, which was the second straight month of accelerating growth.

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. 

Durable Goods New Orders Continue to Contract

Durable Goods New Orders Continue to Contract

New orders for real durable goods totaled $186,870 million in May. This was the second lowest total since July 2009 and was down 22.3% from one year ago. May was the second fastest rate of month-over-month contraction since June 2009, and May was the third consecutive month of faster than 17% contraction.  

The result was that the annual rate of change contracted 9.1%, which was the fastest rate of annual contraction since April 2010. The sharp deceleration in growth in consumer durable goods spending in March through May means that durable goods new orders will continue to contract faster. 

May Durable Goods Spending Returns to Pre-Pandemic Level

In May, real consumer durable goods spending was $1,809, 279 million, which brought real consumer durable goods spending back to its pre-pandemic level. The month-over-month rate of growth for durable goods spending was 2.4%, ending two months of contraction. 

The annual rate of growth decelerated for the third consecutive month, decelerating to the slowest rate of growth since June 2010. However, the real 10-year Treasury rate is falling at its fastest year-over-year rate since late 2012. So far, lower interest rates have been enough to overcome lower incomes and boost durable goods spending. The question is will that continue without a significant increase in employment?

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.