December GBI at 49.8 – Little Change from November

With a reading of 49.8, the Gardner Business Index shows that the state of durable goods manufacturing was virtually unchanged compared to November. Technically, the industry contracted ever so slightly after two months of very modest growth. In December 2013, the index was 13.7% higher than it was one year ago. This is the fifth time in six months that index has higher than it was one year ago. Also, this is the third straight month of double digit growth in the month-over-month rate of change.

The index dipped slightly in December because of changes in production and employment. Production was flat but recorded the largest change of any sub-index. Even though new orders continued to grow, production was likely flat because the Christmas and New Year’s holidays fell during the middle of week. Therefore, many facilities may have closed for an extended period. While employment grew for the fourth consecutive month, the sub-index had the second largest change in December. Backlogs continue to contract, although the rate of contraction the last three months has been much slower than the rate of contraction the previous six months. Exports contracted at their slowest rate since April 2012. Supplier deliveries continued to lengthen at a consistent rate. Material prices have increased at a faster rate since August 2013. While prices received had been mostly flat for all of 2013, in December prices received increased at the fastest rate since February 2013. Future business expectations have improved significantly since August 2013, reaching their highest level since March 2012.

Facilities with more than 50 employees continued to grow, although the rate of growth slowed slightly from the previous month. Plants with 20-49 employees grew for the first time since October 2012. And, even though they continue to contract, shops with fewer than 20 employees have contracted at a significantly slower rate the last couple of months. The improving condition at smaller facilities is one of the main reasons why the overall index has improved in recent months.

The aerospace industry grew at the fastest rate in December. Its rate of growth was the fastest for the industry since September 2012. Machinery and equipment manufacturing, which grew for the third straight month, was the second fastest growing industry. Plastics and rubber grew for the second time in three months. All other industries contracted in December. However, because of the holidays and the timing of the survey, a number of industries did not receive enough responses to calculate an index.

The West South Central region grew at the fastest rate by far in December. It was the region’s second straight month of growth. The Mountain, South Atlantic, and New England regions also grew in December. These regions have been growing for several months. The East North Central region was flat after growing in November. The other four regions contracted.

Planned capital expenditures for the next 12 months remained fairly strong. The average planned spending per plant in December was 8.7% higher than it was last December. The annual rate of change, which was 26.9%, indicated that planned spending was growing faster.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The composites industry grew for the second time in three months. It recorded the fastest rate of growth in December. The only other industry to grow was the precision machining industry. It was the first time this industry grew since June 2012. The metalworking industry was flat after two months of growth. Plastics and moldmaking contracted after growing last month. Finishing contracted at a moderate rate for the second straight month.

Also, you can find indices for the following end markets: aerospace; automotive; custom processors; electronics, computers and telecommunications; forming and fabricating (non-auto); machinery and equipment manufacturing; medical; metalcutting job shops; petrochemical processors; plastics and rubber; primary metals; and pumps, valves, and plumbing products.