October GBI at 51.4 – Growth Accelerates Most since May

With a reading of 51.4, the Gardner Business Index showed that durable goods manufacturing grew for the 10^th consecutive month and for the 12^th time in the last 13 months. The increase in the index in October was the most since May. However, the rate of growth compared to one year ago was the slowest since August 2013. The index was just 1.8% higher this October than it was in October 2013. The annual rate of growth decelerated for the first time in 2014 but is still at a healthy 9.8%.

New orders grew for the 13^th month in a row, growing at virtually their fastest rate since June. Production expanded for the 10^th month in a row, also growing at virtually its fastest rate since June. Backlogs contracted for the seventh month in a row, contracting at a slower rate than last month. The backlog index was 1.1% higher than it was last October, which is the slowest rate of growth in backlogs since August 2013. The annual rate of change in backlogs has grown at a slower rate for two months. Employment has increased for 14 straight months, but the rate of increase was virtually the slowest of 2014. Exports contracted for the sixth consecutive month due to the relative strengthening of the dollar. Supplier deliveries continued to lengthen but the rate of increase has slowed the last two months. Material prices continue to increase at a significant rate, but the rate of increase has been constant since July. Prices received have increased for six months in a row, which is the longest stretch of price increases since the summer of 2012. Future business expectations dropped noticeably in October to their lowest level since September 2013.

Larger facilities continued to see better business conditions than smaller facilities in October. However, plants with more than 100 employees saw their rate of expansion fall to the slowest rate of 2014. Facilities with 50-99 employees saw an increase in their rate of growth. These plants have been growing at a strong rate since June. After contracting last month, shops with 20-49 employees expanded in October. Shops with 1-19 employees continued to contract, but they contracted at their slowest rate since May.

For the fifth month in a row, the South Central grew at the fastest rate. Also growing were the North Central – East and North Central – West. October had the fewest growing regions since December 2012. The Northeast was flat. Both the West and Southeast moved from growth to contraction.

Two regions had an index above 60.0 in October – primary metals and machinery/equipment. Also growing at a significant rate were pumps/valves/plumbing products, forming/fabricating (non-auto), and petrochemical processors. There was very modest growth in aerospace and industrial motors/hydraulics/mechanical components. Automotive and electronics/computers/telecommunications moved from growth to contraction in October. Continuing to contract were metalcutting job shops and custom processors.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The finishing industry grew at the fastest rate in October with an index of 53.0. It was followed by the, metalworking, plastics, and moldmaking industries. composites and screw machining had a very modest contraction.

Planned capital expenditures contracted month over month by more than 10% for the third time in four months. Annually, future capital spending plans were still increasing but the rate of increase has decelerated since June.