Gardner Intelligence Blog

There is a strong relationship between the unemployment rate and the percentage of loans which are either delinquent or in default. Between March 21st and April 11th which includes the latest available data at time of this article’s publication, over 22 million people have filed initial unemployment insurance claims. This vast increase in unemployment suggest that near-term credit conditions are nearly certain to deteriorate substantially.

Coming into 2020, many important forms of credit including Commercial and Industrial loans and Real Estate loans were indicating some of the lowest rates of credit stress (defaults) since the great recession. Compared to long-term historical levels, consumer loan defaults are near their multi-decade average rate. Consumer loans have experienced a slowly increasing default rate since late 2015 when default rates were below 2%, setting a multi-decade record low.

Change in 10-Yr Treasury Rate Lowest Since July 2012

In March, the nominal 10-year Treasury rate was 0.87%, which was the first time ever the monthly average was below 1%. Also, this month’s rate was virtually half of last month’s rate, which was the previous all-time low.

The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was -1.06%. This was the third consecutive month the real rate was negative. And, it was the lowest negative real rate since July 2012.

February machine tool orders were 1,549 units and $269,721,000.

February’s unit orders were the lowest since July 2016. Orders for the month contracted 20.3% compared with a year ago. This was the eighth month in a row of contraction and the sixth in the last seven with a rate of contraction faster than 20%. The annual rate of contraction accelerated for the second month in a row to -15.3%. This was the fastest rate of annual contraction since August 2016.

Monetary Base Grows at Fastest Rate Since September 2014

In March, the monetary base was $3.883 trillion, which was its highest level since November 2017. (Of course, as of this writing in mid April, the monetary base has increased much more than this.) This was the fourth month in a row of month-over-month accelerating growth, which tends to be a positive sign for capital equipment consumption. March’s 14.8% rate of growth was much faster than the previous three months and the fastest rate of month-over-month growth since September 2014.

The annual rate of contraction in the money supply, -4.7%, decelerated for the fifth month in a row, which also is a positive sign for capital equipment consumption. This was the slowest rate of annual contraction since December 2018. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.

During the week of April 6th, Gardner Intelligence conducted a survey to gauge the effects of COVID-19 on discrete parts manufacturers across all the industries that Gardner Business Media covers. The survey focuses on two basic questions:

For each of those questions, respondents were asked to compare the current state of their business to the norm prior to COVID-19 and rank the severity of the change or adjustment from minimal to moderate to major. You can go here to view all of the data for last week’s survey.

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.