June GBI at 54.4 – Growth Rate Remains Strong

With a reading of 54.4, the Gardner Business Index shows that durable goods manufacturing grew for the sixth consecutive month and for the eighth time in the last nine months. The index has been 53.0 or higher every month of 2014. Compared to June 2013, the index was 15.5% higher this month. This is the 10th month in a row that the index has been higher than it was one year ago. And, June had the second fastest rate of month-over-month growth since the index in began in December 2011 (only November 2013 was higher). The annual rate of change has grown at an accelerating rate for five straight months. Durable goods manufacturing was growing at an annual rate of 8.3% in June.

New orders grew for the ninth month in a row. Also, it was the sixth month in a row that the new orders index was above 55.0. Production expanded for the sixth month in a row, with every month recording an index of 56.0. Both new orders and production have grown at a slower rate since March 2014 though. Backlogs contracted for the second month in a row, although the rate of contraction was relatively mild. Even though the backlog index contracted, it was still 18.9% higher than it was one year ago. This is the fourth straight month of more than 15.0% month-over-month growth in backlogs. This is a positive sign for future capacity utilization and capital equipment spending. Employment increased for the 10th month in a row. Exports have increased in two of the last four months. Supplier deliveries have lengthened at a steadily accelerating rate since August 2013. Since August 2013, material prices have been increasing at an accelerating rate. Prices received by durable goods manufacturers have increased at a noticeably faster rate the last two months. Future business expectations remained steady in June, approaching their highest level of this expansionary cycle.

Growth at plants with more than 250 employees slowed slightly in June, but the rate of growth has been strong throughout 2014. At plants with 20-249 employees, the growth rate accelerated compared to last month. After one month of growth, facilities with fewer than 19 employees contracted once again. This was their fastest rate of contraction since December 2013.

For the fourth month in a row, all regions of the country expanded. The South Central grew at the fastest rate in June, and it grew at its fastest rate since April 2012. The West grew at a slightly slower rate than the South Central and at its fastest rate since the index began. The North Central – East was the next fastest growing region, reaching its second fastest rate of growth since the index began. While the other three regions continued to expand, they all did so at a slower rate.

Every industry segment but one expanded in June. For the second month in a row, the fastest growing industry was primary metals, which recorded an index of 64.9. It was followed by medical, petrochemical processors, plastics and rubber, machinery and equipment, pumps, valves, and plumbing products, metalcutting job shops, automotive, custom processors, forming and fabricating (non-auto), and electronics, computers, and telecommunications. The only industry to contract was aerospace.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The screw machining industry grew at the fastest rate in June with an index of 55.5. It was followed by the finishing, composites, moldmaking, plastics, and metalworking industries.

Compared to one year ago, planned capital expenditures increased by 22.9%. This was the fourth month in a row that the month-over-month rate of change was positive. The annual rate of change has slowly accelerated the last three months.