GBI Improves to 47.2

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With a reading of 47.2, the Gardner Business Index showed that durable goods manufacturing industry contracted for the 11^th month in a row. But, the index has increased significantly the last two months, indicating that durable goods manufacturing is entering a recovery.

New orders contracted for the 11^th consecutive month, but the rate of contraction has decelerated substantially the last four months. Production continued to contract, but it too has improved the last four months. Although, the production index has not improved as much as the new orders index. While the backlog index continued to contract, it improved noticeably for the third month in a row. It has clearly broken out of its downward trend, indicating that capacity utilization will likely bottom out in seven to 10 months. Employment contracted for the seventh month, although the rate of contraction has stabilized. Exports remained mired in contraction, but the rate of contraction has slowed in recent months. Supplier deliveries lengthened after shortening the previous three months.

Material prices decreased for the seventh month in a row, but the rate of decrease slowed significantly. Prices received decreased for the ninth consecutive month. The decrease in prices received slowed as well. Future business expectations improved from last month but remain near their lowest level of the last two years.

Plants with more than 250 employees contracted for the third month in a row, but the rate of contraction in February was the slowest of those three months. Facilities with 100-249 employees contracted at an accelerating rate for the second straight month. Facilities with 50-99 employees contracted for the seventh month. Companies with 20-49 employees grew for the first time since March 2015. Companies with 1-19 employees continued to contract but had their highest index since June 2015.

Despite the improvement in the total index, every region contracted in February. The Southeast was the best performing region for the fourth month in a row. It was followed by the Northeast, North Central-East, South Central, West, and North Central-West. This was the first time the South Central was not the worst region since November 2014.

Hardware was the fastest growing industry in February with an index of 66.7. It was followed by plastics/rubber products, off-road/construction machinery, ship building, electronics/computers/telecommunications, and petrochemical processors. The appliance industry was unchanged. Industries from slowest to fastest contraction were other manufacturing, industrial motors/hydraulics/mechanical components, forming/fabricating (non-auto), machinery/equipment, custom processors, metalcutting job shops, automotive primary metals, aerospace, pumps/valves/plumbing products, medical, power generation, HVAC, military, furniture, and oil/gas-field/mining machinery.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. This was the first month that all technologies did not contract in seven months. Composites was the lone process to grow in February. From slowest to fastest contraction, the technologies were plastics, moldmaking, finishing, metalworking, precision machining.

Planned capital expenditures for the next 12 months increased to their second highest level since August. The month-over-month rate of change continued to contract at a rate of 15.4 percent, but the rate of contraction has slowed significantly the last five months. The annual rate of contraction appears to have bottomed out, indicating that capital spending could recover soon.