January GBI at 53.8 – Fastest Growth Since April 2012

With a reading of 53.8, the Gardner Business Index shows that the state of durable goods manufacturing improved significantly in January. Technically, the industry contracted ever so slightly after two months of very modest growth. Durable goods manufacturing has grown three of the last four months, but the rate of growth in January was the fastest since April 2012. The index has been trending up at a rapid rate since August 2013. In January, the index was 8.5% higher than it was one year ago. The is the sixth time in seven months that index has been higher from one year ago.

New orders have grown for four consecutive months and are growing at their fastest rate in nearly two years. Production has grown four of the last five months and is growing at its fastest rate since April 2012. Backlogs increased for the first time since March 2012. The trend in backlogs indicates that capacity utilization should be increasing in 2014. Employment has grown five months in a row and is growing at its fastest rate since the summer of 2012. Exports continue to contract. They did so at a slightly faster rate, likely as a result of the Fed’s tapering. Supplier deliveries continue to lengthen, but the rate has been consistent for about a year. Material prices have increasing at a faster rate the last two months. Prices received also have increased the last two months, but at a slower rate than material prices. Future business expectations have improved rapidly, reaching their highest level since March 2012.

For the first time since April 2012, facilities of all sizes grew in January. Facilities with more than 50 employees saw their rate of growth jump noticeably in January. And, they continue to perform substantially better than facilities with fewer than 50 employees. But, the rate of improvement in the index at the smallest facilities has been very strong since August 2008.

For the second month in a row, the aerospace industry grew at the fastest rate. Its rate of growth was the fastest for the industry since September 2012. Industrial motors, hydraulics, and mechanical components, which grew for the third straight month, grew at the second fastest rate in January. It was followed by plastics and rubber; pumps, valves, and plumbing products; machinery and equipment manufacturing; metalcutting job shops; electronics, computers, and telecommunications; off-road and construction machinery; automotive; and custom processors. Forming and fabricating (non-auto) contracted for the eighth month in a row and medical contracted for the second month in row.

Of the nine regions, seven grew in January. The growth in durable goods manufacturing has not been that widespread since May 2012. New England, which grew for the fourth time in five months, grew at the fastest rate. It was followed by the West North Central, East South Central, East North Central, West South Central, Middle Atlantic, and Pacific regions. The South Atlantic and Mountain regions contracted for the first time in several months.

Planned capital expenditures for the next 12 months were $1.010 million per plant. This is only the third time in the history of the survey that planned spending has been more than $1 million per plant. While the level of planned spending is high, the rate of growth has slowed somewhat.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The precision machining industry, which had not grown since June 2012, was the fastest growing technology/process in January. It was followed by metalworking, composites, moldmaking, plastics, and finishing. Almost every one of these technologies/processes grew at its fastest rate since the summer of 2012.