10-Year Treasury Rate Trend Is Positive for Manufacturing

In October, the year-over-year change in the real 10-year Treasury rate was -0.77%, which was the 10th consecutive month the change was negative.

In October, the nominal 10-year Treasury rate was 1.71%, staying under 2.00% for the third month in a row. October was the fifth month in a row in which the nominal 10-year Treasury rate averaged less than the Fed Funds Rate, which is the overnight lending rate. The 10-year Treasury rate falling below the Fed Funds rate tends to indicate a recession is ahead.

The annual rate of inflation according to the CPI was below 2.00% for the sixth month in a row 10th time in 11 months. As a result, the real 10-year Treasury rate was -0.08%. October was the fourth time in five months that the real 10-year Treasury rate was negative.

In October, the year-over-year change in the real 10-year Treasury rate was -0.77%, which was the 10th consecutive month the change was negative. Also, it was the lowest the annual change had been since December 2017.

The low and falling change in the real 10-year Treasury rate tends to be a positive signal for durable goods manufacturing. Changes in the real 10-year Treasury rate tend to lead capital equipment consumption by a relatively long period of time – historically, between 12 and 24 months. The change in the 10-year Treasury rate is a good leading indicator of housing permits, construction spending, consumer durable-goods spending, durable goods new orders, and capital equipment spending. An decreasing year-over-year change in the real 10-year Treasury rate should lead to increases in all of these data points down the line.

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.