Gardner Intelligence Blog

Growing Railcar Units Activity Consistent with Growing Durable Goods Orders

Durable Goods: New Orders during the fourth quarter of 2020 were showing strong year-over-year gains.  In the latest available release, monthly new orders very nearly matched pre-pandemic levels ($244.4B  vs. $246.2B in 2/2020). Unfortunately, the latest reading for Durable Goods: New Orders is from November; however, there are high-frequency measures that can serve as a proxy for monitoring durable goods orders and activity in near real-time.  One of these is railcar activity measured weekly.

For the week period ending 1/16/2021, total carload units was up 5.4% from the same week 1-year ago. Charted here is the 4-week moving average of the same metric, along with a 4-week moving average of carload units. The 4-week average change indicates a slightly lower 3.6% increase in carload units activity using Gardner’s own calculation.

Housing Permits Up 25% in December

Housing Permits Up 25% in December

There were 134,100 housing permits filed in December 2020, which was the highest total since July 2020. Permits filed in December increased a whopping 25% compared with one year ago. This was the fastest rate of growth since June 2015 and the second-fastest rate of growth since July 2013. Housing permits grew six of the last seven months and in five of those months, the growth was faster than 11.5%. In December, the annual rate of growth accelerated to 6.2%. December was the 17th-straight month of growth and the ninth in the last 11 with growth faster than 5.0%.

The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was -0.31%. This was the 12th consecutive month and 15th of the last 17 that the real rate was negative. However, the rate was grinding slowly higher since April.  December’s real rate was the highest since December 2019, which was the last time the real 10-year Treasury rate was positive.

Monetary Base at Highest Level Ever in December

Monetary Base at Highest Level Ever in December

In December, the monetary base was $5.207 trillion, which was an increase from the previous month and the highest level ever. Compared with one year ago, December’s monetary base was up 52.0%, which was the fourth month in a row and sixth in the last eight months with faster than 50% growth. This was the ninth consecutive month that the month-over-month rate of change was faster than 44%. This was the 13th month in a row of month-over-month growth. 

The annual rate of growth accelerated to 39.8% in December, which was the ninth straight month of accelerating growth and the fastest rate of growth since May 2010. Based on the monthly and quarterly trends in the money supply, the annual rate of change will contract to accelerate for the first half of 2021.

Durable Goods Production Contraction Decelerates

Durable Goods Production Contraction Decelerates

In December, the index for production of durable goods was 102.4. Compared with one year ago, the index contracted 3.3%, which was the slowest rate of contraction since February 2020. 

The annual rate of change, which is easier to correlate with other data points, contracted 9.1% this month. This was the 10th consecutive month of accelerating contraction. The key leading indicator of production – durable goods new orders – has bottomed out, according to its rate of change, and indicating that production should do the same soon. Also, consumer durable goods spending, which leads durable goods new orders, has grown more than 11% for six months in a row. This seemingly means production needs to increase significantly to keep from eating too far into inventories.

Capacity Utilization Highest Since February 2020

Capacity Utilization Highest Since February 2020

In December, durable goods capacity utilization was 73.0%, which was the fifth month in a row that the rate of capacity utilization was above 70% and the highest rate of capacity utilization since February 2020. Compared with one year ago, capacity utilization contracted 2.9%, which was the slowest rate of contraction since February 2020. 

The annual change in durable goods capacity utilization contracted at an accelerating rate for the 14th month in a row. December was the fastest rate of annual contraction since March 2010. As the annual rate of change tends to lead capital equipment consumption by seven to 10 months, capacity utilization is signaling a bottom in the annual rate of change in capital equipment about the second quarter of 2021.

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.