May GBI at 54.4 – Growth Accelerates
With a reading of 54.4, the Gardner Business Index shows that durable goods manufacturing grew for the fifth consecutive month and for the seventh time in the last eight months. The growth rate accelerated compared to last month. And, May’s rate of growth was the second fastest since April 2012. Compared to May 2013, the index was 9.7% higher this month. This is the ninth month in a row that the index has been higher than it was one year ago. And, May had the second fastest rate of month-over-month growth in 2014. The annual rate of change has grown at an accelerating rate for four straight months. Durable goods manufacturing was growing at an annual rate of 6.3% in May.
New orders grew for the eighth month in a row. Also, it was the fifth month in a row that the new orders index was above 55.0. Production expanded for the fifth month in a row, with every month recording an index of 56.0. Backlogs contracted for the third time in four months, although the rate of contraction was extremely mild. Even though the backlog index contracted, it was still 16.6% higher than it was one year ago. This is the third straight month of more than 15.0% month-over-month growth in backlogs. This is a positive sign for future capacity utilization and capital equipment spending, although we haven’t seen a turn in these data points yet. Employment increased for the ninth month in a row. After just one month of growth, exports contracted for the second straight month. Supplier deliveries continue to lengthen at a faster rate than what was seen in most of 2012 and 2013. Since August 2013, material prices have been increasing at an accelerating rate. Prices received by durable goods manufacturers did increase at a slightly faster rate in May. Future business expectations picked up in May, approaching their highest level of this expansionary cycle.
All plant size categories expanded in May for just the second time since April 2012. The growth rate picked up in both the largest and smallest facilities. Plants with more than 250 employees saw their third fastest rate of growth since the index began in December 2011. Facilities with 19 employees or fewer expanded for the first time since January 2014 and just the second time since April 2012.
For the third month in a row, all regions of the country expanded. The rate of growth was consistently strong throughout the country. The Northeast, which grew for third straight month, had the fastest rate of growth in May. Its index was 55.6. It was followed by the West, North Central – East, South Central, North Central – West, and Southeast. The Southeast, which had the slowest rate of growth, had an index of 53.4.
Every industry segment but three expanded in May. The fastest growing industry was primary metals, which recorded an index of 64.0. It was followed by pumps, valves, and plumbing products, machinery and equipment manufacturing, forming and fabricating (non-auto), aerospace, metalcutting job shops, automotive, medical, and custom processors. The industries that contracted were plastics and rubber, industrial motors, hydraulics, and mechanical components, and electronics, computers, and telecommunications.
In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The composites industry grew at the fastest rate in May with an index of 56.8. It was followed by the moldmaking, screw machining, plastics, metalworking, and finishing industries. While it grew at the slowest rate, the finishing industry still had an index of 53.5.
Compared to one year ago, planned capital expenditures increased by 11.1%. This was the second month in a row that the month-over-month rate of change was above 11.0%. The annual rate of change has slowly accelerated the last two months.
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