April GBI at 53.6 – Fourth Month of Growth

With a reading of 53.6, the Gardner Business Index shows that durable goods manufacturing grew for the fourth consecutive month and for the sixth time in the last seven months. The industry is still on the uptrend that began in August 2013. Compared to April 2013, the index was 8.9% higher this month. This is the eighth 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 three straight months. Durable goods manufacturing was growing at an annual rate of 4.7% in April.

New orders grew for the seventh month in a row. Also, it was the fourth month in a row that the new orders index was above 55.0. Production expanded for the fourth month in a row, with every month recording an index of 56.0. Backlogs contracted for the second time in three months, although the rate of contraction was extremely mild. While the backlog index contracted, it was still almost 20% higher than one year ago. And, on an annual basis, the backlogs continue to grow at a significantly accelerating rate. 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 eighth month in a row. After just one month of growth, exports contracted once again. 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. However, prices received by durable goods manufacturers have been virtually unchanged the last three months. Future business expectations remain strong, but they have come down from their peak in January of this year.

Plants with fewer than 20 employees contracted for the third straight month while all other plant sizes grew in April. During these three months, the rate of contraction at the smallest facilities has been fairly constant. This month the rate of growth at facilities with more than 50 employees slowed down somewhat. While still at high levels, this was the reason for the slight decline in the total index.

For the second month in a row, all regions of the country expanded. And, for the second month in a row the Southeast was the fastest growing region. It was closely followed by the West and North Central – East regions. The Northeast, North Central – West, and South Central regions grew at more moderate rates.

The electronics industry grew at the fastest rate in April. Its index was above 60.0 for the second month in a row. It was followed by plastics and rubber, machinery and equipment manufacturing, custom processors, pumps, valves and plumbing products, forming and fabricating (non-auto), and metalcutting job shops. However, two of the most significant industries for durable goods manufacturing, automotive and aerospace, both contracted at fairly significant rates in April. Automotive and aerospace contracted for the first time since November 2013 and October 2013, respectively.

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 for the second month in a row. It was followed by the moldmaking, metalworking, finishing, screw machining, and composites industries.

Planned capital expenditures were above $1 million for the first time since November 2013. Compared to one year ago, planned capital expenditures increased by 19.1%. This was the second month in a row that the month-over-month rate of change grew. The annual rate of change has been fairly stable the last three months at about 15.0%.