February GBI at 53.0 – Growth in Four out of Five Months
With a reading of 53.0, the Gardner Business Index shows that durable goods manufacturing grew for the second straight month and the fourth time in the last five months. The first two months of 2014 are the strongest period of growth since April and May of 2012. Compared to February 2013, the index was 6.0% higher. This is the sixth consecutive month that the index was higher than it was one year ago. The annual rate of change is now positive as well.
New orders have grown for five straight months, although the rate of growth fell slightly from January. Production expanded for the sixth time in seven months. Both new orders and production are on a significant upward trend. While backlogs increased last month, they contracted ever so slightly in February. The overall trend is still quite positive for backlogs though. This indicates a further increase in capacity utilization and capital equipment spending in 2014. Employment grew for the sixth month in a row. The rate of hiring has accelerated in recent months. Exports continue to contract at a consistent rate. Supplier deliveries have been lengthening at an accelerating rate since August 2013. Materials prices have been increasing at an accelerating rate since August 2013 as well. February was the fastest rate of increase in material prices in one year. Prices received increased for the third month in a row. However, the rate of increase is substantially lower than the rate of increase in material prices. Finally, future business expectations remain quite strong and are near the highest levels in the history of the index.
Facilities with more than 50 employees expanded at a similar rate to January. Shops with 20-49 employees saw their rate of expansion accelerate in February. These shops are expanding at their fastest rate since April 2012. After growing last month for the first time since April 2012, shops with 19 or fewer employees saw business conditions contract once again. However, the rate of contraction was significantly slower than all but two months since April 2012.
In February, 10 of the 12 end markets expanded. Electronics grew at the fastest rate. It grew for the second month in a row. Machinery and equipment grew for the fifth consecutive month. The rate of growth has accelerated each of the last three months. In order of fastest to slowest growth, the other growing end markets were primary metals, plastics and rubber, automotive, aerospace, medical, industrial motors, hydraulics, and mechanical components, metalcutting job shops, and custom processors. Every one of these end markets has grown for at least two straight months except medical. The only two end markets to contract were forming and fabricating (non-auto) and pumps, valves, and plumbing products. Both industries contracted at a marginal rate. And, the contraction in forming and fabricating was the slowest since May 2013, which was the last time it expanded.
Of the nine regions, six grew in February, which is one fewer than last month. The West South Central grew at the fastest rate in February. Since November, it has experienced the fastest and most consistent growth of any region. The South Atlantic region has grown four of the last five months. In order of the fastest to slowest growth, these regions were followed by the West North Central, East North Central, and New England. Both the East North Central and Middle Atlantic regions contracted after expanding in January. The Mountain region contracted for the second straight month.
Planned capital expenditures for the next 12 months fell to their lowest level since November 2012. Planned expenditures were 22.0% lower than they were last February. This is the first time the month-over-month rate of change contracted since December 2012. The annual rate of change in expenditures is still growing at a significant rate, but it has slowed the last two months.
In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The metalworking industry grew at the fastest rate in February. It has grown four of the last five months. It was followed by the composites, production machining, finishing, plastics, and moldmaking industries. For the second month in a row all of the industries expanded.
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