Economic News Blog
Posted by: Steven Kline, Jr. 1. February 2013

January GBI at 49.6 – Durable Goods Manufacturing Virtually Flat

With a reading of 49.6, the Gardner Business Index showed that durable goods manufacturing was virtually flat in January 2013 compared to December 2012. While this marks the seventh month of contraction, the index has moved up sharply the last two months. This is a clear break in the trend line for durable goods manufacturing that had been in place since March 2012. The trend is quite positive for the strength of durable goods manufacturing in 2013.

 

All of the sub-indices made a positive contribution to the improvement in the index. After six months of contraction, new orders made a significant jump above 50 that indicates strong growth. Production has rebounded sharply the last two months. January was the first month of growth in production since August 2012. While backlogs continue to contract for the 10th month, they did so at a much slower rate. Employment made a relatively small improvement, but it did switch to growing from contracting. Exports remain weak, having contracted for nine months, as the dollar remains relatively strong compared to other world currencies. Finally, supplier deliveries continued to lengthen at relatively the same rate, indicating widespread strength throughout the manufacturing supply chain.

Material prices continue to increase. They are climbing at their fastest rate since March 2012. The recent surge is likely due to the two new rounds of quantitative easing announced by the Federal Reserve towards the end of 2012. But, pressure on profits likely eased somewhat as prices received by manufacturers increased significantly after three months of contraction. While future business expectations remain somewhat muted, they made a sharp jump in January as manufacturers move past the election and the fiscal cliff debate.

Durable goods manufacturers have increased their capital spending plans. Since the survey was started in December 2011, this month’s results have the highest average spending per plant in real dollars. In fact, future capital equipment spending plans for the next 12 months have increased by almost 50% compared to November 2011.

For more information and charts on the Gardner Business Index, go here.

In addition to the Gardner Business Index, you can find indices for the following technologies and end markets: composites; finishing; metalworking; moldmaking; plastics; production machining; aerospace; automotive; custom processors; electronics, computers and telecommunications; forming and fabricating (non-auto); machinery and equipment manufacturing; medical; metalcutting job shops; and primary metals.

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