April GBI at 49.3 - Durable Goods Flat in 2013

With a reading of 49.3, the Gardner Business Index shows that durable goods manufacturing contracted slightly in April 2013. For the first four 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. Facilities with more than 50 employees have been growing at a good rate so far in 2013. These same facilities had contracted in the second half of 2012. However, smaller facilities, those with fewer than 50 employees, have contracted in 2013. For these smaller facilities, the rate of contraction has been slower in 2013 than it was in the second half of 2012. Also, there is an interesting split across industries. Almost all of the specific industries (for example, aerospace, electronics, plastics and rubber, etc.) we track have been growing for most of 2013. However, custom processors and metalcutting job shops have fared relatively worse and are contracting again in April. I think this data points towards some short term over capacity in U.S. manufacturing. This is likely a result of a slowdown in orders and the lack of inventory buildup throughout durable goods manufacturers and retailers. Some other data in the survey supports this, as you will see below and in the industry and process specific pages on our website.

Regionally, the New England and Pacific regions have grown the last three months while the West North Central has grown the last two months. Moving from contraction to growth in April were the East South Central and West South Central regions. The South Atlantic region moved from growth to contraction. And, the East North Central, Middle Atlantic, and Mountain regions have contracted for at least the last two months.

Both new orders and production grew for the fourth month in a row. But, the rate of growth slowed in April for both. Production grew faster than new orders in April, which helped accelerate the contraction in backlogs. However, backlogs have been decreasing since April 2012, even with orders growing faster than production in the first quarter of 2013. I think this is another piece of data that signals there is some overcapacity right now in durable goods manufacturing. Employment continues to grow as it has for all but two months since the index began in December 2011. Exports have contracted since May 2012 as the dollar has become stronger against other currencies. Supplier deliveries continue to lengthen, but they are doing so at nearly the slowest rate in the history of this index. This is another sign that perhaps there is some over capacity in durable goods manufacturing. Materials prices continue to increase, but the rate of increase has slowed to its slowest pace since December 2012. However, prices received began contracting in April for the first time since December 2012. Yet another sign that there might be some over capacity in durable goods manufacturing. Finally, future business expectations have improved compared to the second half of 2012 but have remained relatively level in 2013.

Capital spending plans remain relatively strong, although they have come down a little bit from the first two months of the year.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The composites industry is growing the fastest and has grown for two consecutive months. Also growing in April is the finishing industry. Metalworking, moldmaking, production (screw) machining, and plastics all contracted this month.

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.