May GBI 49.9 - Durable Goods Manufacturing Flat
With a reading of 49.9, the Gardner Business Index shows that durable goods manufacturing was flat in May 2013. For the first five months of 2013, business activity in durable goods has been essentially flat. However, the internal demographics show some divergences in activity across plant sizes and industries. The bifurcation in business activity between plants with more than 50 employees expanding while those with fewer than 50 employees contracting continues. Every industry segment except automotive, metalcutting job shops, and primary metals expanded in May.
Regionally, New England continues to perform the best with faster growth each of the last four months. The West North Central has grown four of the last five months. The Pacific and South Atlantic regions have grown three of the last four months. And, the West South Central has grown the last two months. The East South Central moved from growth to contraction while the East North Central was flat. The Mountain region contracted faster for the third straight month. The Middle Atlantic continues to be the worst performing region, contracting for 13 consecutive months.
New orders grew for the fourth time in five months while production grew for the fifth month in a row. Employment grew faster in May. And, suppler deliveries lengthened more in May. These four sub-indices have consistently contributed to the better performance of durable goods manufacturing since December 2012. However, growth in durable goods manufacturing has been held back by backlogs and exports. Backlogs have contracted since March 2012. Significant increases in capital spending in 2010 through 2012 added a large amount of manufacturing capacity. With durable goods spending and orders slowing in 2012 there has not been enough activity to make use of all that capacity. So, backlogs have been contracting. Exports have been contracting since May 2012. Since then the dollar generally has been appreciating against other world currencies. This has made American exports relatively more expensive. Also, economies around the world have performed worse than in the U.S., which has also hurt exports. If backlogs and exports turn around while the other four sub-indices continue their solid performance, then the Gardner Business Index should show substantial growth in durable goods manufacturing.
Material prices continue to grow at a faster rate than they did in the second half of 2012. Prices received by manufacturers have grown four of the last five months, but the rate of growth is much slower than that of material prices. Future business expectations have been relatively consistent - above the levels of the second half of 2012 but below the levels of the first half of 2012. Capital spending plans remain relatively strong, although the rate of growth in spending plans has slowed from the first three months of 2013.
In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The composites industry has grown the last three months, although the rate of growth has slowed each month. The plastics industry has grown four of the last five months and currently has the fastest rate of growth. The moldmaking industry has grown three of the last four months. Finishing moved from growth to expansion in May. The metalworking industry contracted very slightly in May and has been essentially flat in 2013. The precision machining industry has contracted every month but one since July 2012.
Also, you can find indices for the following end markets: aerospace; automotive; custom processors; electronics, computers and telecommunications; forming and fabricating (non-auto); industrial motors, hydraulics and mechanical components; machinery and equipment manufacturing; medical; metalcutting job shops; petrochemical processors; plastics and rubber; primary metals; and pump, valves, and plumbing products.
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