Economic News Blog
Posted by: Steven Kline, Jr. 2. September 2016

GBI August: 48.7

With a reading of 48.7, the Gardner Business Index improved significantly in August. While the index showed that durable goods manufacturing continued to contract, the index was at its second highest level since July 2015. It does appear that since October 2015 that the industry has been on an upward trend.

New orders grew for the first time since March 2016 and just the second time since March 2015. The production index also grew for the first time since March, hitting its highest level since March 2016. The backlog index continued to contract but has improved somewhat the last two months. Employment has contracted every month but one since August 2015. The exports index continued to contract but the rate of contraction has slowed since last fall. Supplier deliveries were still lengthening, but the rate of lengthening slowed each of the last two months.

The material prices index remained near 60 for the fourth month in a row, indicating a consistently strong increase in material prices. While prices received continued to contract, the index has improved notably since November 2015 and was just below 50 this month. Future business expectations improved in August.

Plants with more than 250 employees expanded after two months of contraction. Facilities with 100-249 employees have contracted every month but one since September 2015, but the contraction was minimal in August. Facilities with 50-99 employees expanded for the fourth time in six months. Companies with 20-49 employees contracted for the fifth month in a row. Companies with 1-19 employees have contracted since June 2015, but the rate of contraction in August was the slowest since August 2015.

While every region contracted the last two months, three of the six regions expanded in August. The Southeast was the fastest growing region followed by the South Central and the North Central-East. This was the first time the South Central region grew since December 2014. The West, Northeast, and North Central-West all contracted.

Ten industries grew in August compared with only four the previous month. Off-road/construction machinery was the fastest growing industry in August with an index of 60.7. It was followed by other manufacturing, hardware, plastics/rubber products, custom processors, petrochemical processors, military, aerospace, pumps/valves/plumbing products, and machinery/equipment. Furniture and industrial motors/hydraulics/mechanical components were flat. All other industries contracted. From slowest to fastest contraction, they were forming/fabricating (non-auto), medical, electronics/computers/telecommunications, automotive, metalcutting job shops, primary metals, power generation, HVAC, ship building, oil/gas-field/mining machinery, and construction materials.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. Composites and moldmaking grew in August. Metalworking plastics, finishing, and precision machining all contracted.

Planned capital expenditures for the next 12 months were above average in August for the first time since February 2015. The one-month rate of change grew for the fifth month in a row. The annual rate of change contracted at a decelerating rate for the sixth month in a row and should grew in the next couple of months. This was a positive sign for capital equipment spending in durable goods manufacturing.

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