Economic News Blog
Posted by: Steven Kline, Jr. 2. June 2015

May GBI at 48.4 - Second Month of Contraction

With a reading of 48.4, the Gardner Business Index showed that durable goods manufacturing contracted for the second month in a row and at a slightly faster rate than the previous month. The index measures month-on-month changes. But, month-over-month changes (e.g. May 2015 compared with May 2014) show that the index has contracted at an accelerating rate for five months. The current rate of contraction was the fastest since February 2013. While the industry was still growing on an annual basis in June that will most likely change in June.

New orders contracted for the second month in a row. The index fell sharply over the last two months. Production has expanded every month since January 2014, but the rate of expansion was minimal the last two months. Because production generally has been stronger than new orders, the backlog index has fallen steadily since March 2014. This trend indicates that capacity utilization will grow more slowly or contract in the second half of 2015. Hiring was barely positive in May. Exports continued to contract. They have done so at the same rate all year. Supplier deliveries lengthened at a slightly faster rate this month.

Material prices have increased the last two months. The rate of increase is still near the lowest in the survey’s history though. Prices received eked out a minimal gain after minimal decreases the previous two months. Future business expectations have fallen sharply the last two months to their lowest level since September 2013.

Plants with more than 250 employees had significantly better business conditions in May. They grew at their fastest rate since January. Plants with 100-249 employees contracted for the first time since April 2013. Their index fell to 48.9 from 56.5. Facilities with 50-99 employees continued to expand, but the growth was minimal in May. Facilities with 20-49 employees contracted at a faster rate for the second month in a row. Companies with fewer than 20 employees remain mired in contraction.

The West was the fastest growing region this month. It grew for the fourth time in six months. The only other region to grow was the Southeast, which grew for the fifth time in seven months. The North Central – West, Northeast, North Central – East, and South Central all contracted.

Just four industries grew this month. In order from fastest to slowest growth, they were medical, petrochemical processors, aerospace, and forming/fabricating (non-auto). The contracting industries, from slowest to fastest, were: custom processors, automotive, electronics/computers/telecommunication, primary metals, metalcutting job shops, machinery/equipment, and plastics/rubber products.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. No technology grew this month. Only the moldmaking was flat. From slowest to fastest contracting, the remaining technologies were: finishing, plastics, composites, screw machining, and metalworking.

Planned capital expenditures have been below average for seven of the last eight months. Compared with one year ago, the last three months have seen planned expenditures contract more than 27 percent.

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