Feb. '20 Durable Goods Production Highest in Three Months

While industrial production data for February was just released and a lot has changed since February, the data might contain a few signs of what industries will do well despite COVID-19.

In February, the index for production of durable goods was 108.1, which was the highest level since November 2019. Compared with one year ago, the index contracted 0.3%, which was the sixth straight month of contraction. However, February’s contraction was the second slowest of the six.

The annual rate of change, which is easier to correlate with other data points, grew 0.1% this month. The annual rate of growth decelerated for the 12th straight month. February’s growth rate was the slowest since April 2017, which was the last time the annual rate of change contracted. However, the key leading indicator of production—durable goods new orders—is indicating contraction in production.

Food and beverage production had significant month-over-month growth in February. In fact, it was the fastest such growth since April 2018. Also, it was the fifth straight month of generally accelerating growth. This should continue as grocery stores essentially have been stripped bare in the last week.

In turn, this means that packaging should be in greater demand. The data shows that custom processors and plastic/rubber product manufacturers are trending in the direction of accelerating month-over-month growth.

Finally, on the day this post was written, President Trump invoked the Defense Production Act. This means that government is going to ask manufacturers to shift production to medical equipment and supplies. So, there should be a significant increase in medical production in the months ahead.

We track industrial production and its leading indicators for a number of industries.

Accelerating Growth: construction materials, electronics/computers, food/beverage processing

Decelerating Growth: durable goods, forming/fabricating (non-auto), industrial motors/hydraulics/mechanical components, medical, military, power generation, pumps/valves/plumbing products, ship/boat building

Accelerating Contraction: aerospace, custom processors, hardware, HVAC, machinery/equipment, metalcutting job shops, oil/gas-field/mining machinery, off-road/construction machinery, petrochemical processors, plastic/rubber products, primary metals

Decelerating Contraction: appliances, automotive, furniture, printing, textiles/clothing/leather goods, wood/paper products

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