July GBI at 52.0 – Slowest Growth of 2014
With a reading of 52.0, the Gardner Business Index showed that durable goods manufacturing grew for the seventh consecutive month and for the ninth time in the last 10 months. However, the index recorded its slowest rate of growth in 2014 in July. Compared to July 2013, the index was still 7.2% higher this month. This is the 11th month in a row that the index has been higher than it was one year ago. The annual rate of change has grown at an accelerating rate for six straight months. Durable goods manufacturing was growing at an annual rate of 8.8% in July.
New orders grew for the 10th month in a row. Production expanded for the seventh month in a row. This was the first month the production index had been below 56.0 since December 2013. Both new orders and production have grown at a slower rate since March 2014. Backlogs contracted for the third month in a row, and the rate of contraction has accelerated in each of those months. Even though the backlog index contracted, it was still 10.1% higher than it was one year ago. This is a positive sign for future capacity utilization and capital equipment spending. Employment increased for the 11th month in a row. However, the rate of growth was noticeably slower than any other month in 2014. Exports contracted for the third time in four months. Supplier deliveries have lengthened at a fairly steady rate in 2014. Since August 2013, material prices have been increasing at an accelerating rate. Prices received by durable goods manufacturers have increased for three straight months. But, future business expectations fell to their lowest level since October 2013.
Growth at plants with more than 250 employees remains very strong although the index for these plants fell to its lowest level of 2014. The growth rate also slowed somewhat at facilities with 20-249 employees. At plants with 19 or fewer employees, the index contracted at a faster rate for the second month in a row. July was the fastest rate of contraction at these size facilities since November 2013.
Five of the six regions expanded in July. For the second month in a row, the South Central grew at the fastest rate, and it grew at its fastest rate since April 2012. The other regions that grew in July were the North Central – West, North Central – East, West, and Northeast. All of them grew at a significantly slower rate than the South Central. The Southeast was the only region to contract. It contracted for the first time since January.
All industry segments but two expanded in July. Pumps/valves/plumbing products grew at the fastest rate in July. It was followed by medical, electronics/computers/telecommunications, machinery/equipment, petrochemical processors, primary metals, aerospace, custom processors, automotive, and metalcutting job shops. The only two end markets to contract were forming/fabricating (non-auto), and industrial motors/hydraulics/mechanical components.
In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The plastics industry grew at the fastest rate in July with an index of 54.3. This was noticeably faster than the other industries. It was followed by the metalworking, moldmaking, screw machining, finishing, and composites industries
Planned capital expenditures fell to their second lowest level since November 2012. Compared to one year ago, planned capital expenditures decreased by 13.2%. This was just the second time since December 2012 that the month-over-month rate of change contracted. The annual rate of growth decelerated for the first time since February.
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