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

Gardner Business Index for October: 43.4

With a reading of 43.4, the Gardner Business Index showed that durable goods manufacturing contracted for the seventh month in a row. This is the first sustained period of contraction since the summer of 2013.

The contraction in new orders accelerated compared with last month. The new orders index was below 40.0 for just the second time since the index began in December 2011. Production contracted at an accelerating rate for the fourth month in a row. The backlog index has stabilized in previous months. But, in October, the backlog index fell to its lowest level since December 2012. Employment contracted for the third month in a row as the index fell to its lowest level ever. Exports remained mired in contraction due to the strength of the dollar. Supplier deliveries lengthened at a faster pace than last month, but were lengthening at a rate similar to the average of 2015.

Material prices contracted for the third month in a row. These are the only three months of contraction since the index began in December 2011. Prices received decreased for the fifth consecutive month. In October, the prices received index was at its lowest level ever. Future business expectations continue to slide and were at their lowest level since December 2012.

Only plants with more than 250 employees expanded in October. They have grown three of the last four months. Business conditions were generally unchanged at mid-size facilities, those with 50-249 employees. However, conditions at facilities with fewer than 50 employees weakened noticeably in October. The conditions at small companies is an important distinction between the Gardner Business Index and the ISM. Companies with fewer than 50 employees represent more than 50 percent of all durable goods manufacturing companies.

In October, every region contracted for the third month in a row. All regions except the Southeast contracted at a similar rate to last month. The index for the Southeast fell to 42.6, which was its second lowest level ever.

The fastest growing industry in October was electronics/computers/telecommunications (I excluded oil/gas-field/mining machinery because it had just one response). It has expanded four of the last five months. The only other industry to grow was hardware, which has expanded the last two months. Two industries were flat: petrochemical processors and ship building. All other industries contracted. In order from slowest to fastest contraction they were: other manufacturing, industrial motors/hydraulics/mechanical components, aerospace, custom processors, forming/fabricating (non-auto), medical, plastics/rubber products, machinery/equipment, automotive, pumps/valves/plumbing products, metalcutting job shops, HVAC, power generation, primary metals, off-road/construction machinery, military, and furniture.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. All technologies contracted for the fourth month in a row. From slowest to fastest contraction, the technologies were plastics, moldmaking, composites, finishing, metalworking, and screw machining.

Planned capital expenditures for the next 12 months remained well below their historical average. In October, they contracted 27 percent compared with one year ago. The annual rate of contraction was 26.6 percent and has contracted at an accelerating rate for eight months.

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