Economic News Blog
Posted by: Steven Kline, Jr. 1. October 2013

September GBI at 48.3 – Contraction Slows

With a reading of 48.3, the Gardner Business Index shows that durable goods manufacturing contracted for the sixth consecutive month in September. However, the rate of contraction slowed significantly. And, the index was 4.5% higher than it was in September 2012. The index has been trending down since March 2013, but September’s results indicate that the downward trend may have been broken.

While all of the sub-indices contributed negatively to the overall index last month, in September all of the sub-indices contributed positively to the overall index. The most significant improvement came from new orders, which moved up to 48.4 from 44.4. This is the highest reading for new orders since May 2013. Production registered the second largest improvement and moved to growth from contraction. This was the first month of growth in production since May 2013. Even though it still contracted at a significant rate, the backlog sub-index also made a significant improvement, moving to 42.0 from 38.6. A smaller improvement was made in employment, but it did move to growth from contraction. Supplier deliveries continued to lengthen. Exports contracted at a slightly slower rate.

Most of the improvement was due to a much slower rate of contraction at facilities with fewer than 50 employees. These plants have had generally poor business conditions throughout 2013. And, while they still contracted noticeably in September, the rate of contraction was virtually the slowest since March. Facilities with more than 50 employees saw relatively stable business conditions in September.

Custom processors have grown for eight of the last nine months and September was the fastest rate of growth during that period. Automotive was the fastest growing industry in September and grew for the fourth consecutive month. Several industries made saw significant growth in September after contracting in August – aerospace, medical, and petrochemical processors. In general, other industries continued to contract but at a slower rate in September.

Three regions moved to growth from contraction in September – Mountain, New England, and Middle Atlantic. The Mountain region moved from to fastest rate of growth in September moved from the second fastest rate of contraction in August. The New England region has grown six of the last eight months. The Middle Atlantic region grew for the first time since April 2012. The East South Central region was the worst performer in September, contracting at its fastest rate since the survey was expanded in December 2011.

Planned capital expenditures were up 31.7% compared to September 2012. Planned spending in September was at the second highest level since February 2013. And, it was 13% above the historical average.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. For the third month, none of the technologies expanded. Plastics was the best performer as it just barely contracted in September. The composites industry also contracted quite slowly in September. Metalworking, moldmaking, and finishing all saw significantly slower rates of contraction. Precision machining has contracted at a fairly constant rate the last four months.

Also, you can find indices for the following end markets: aerospace; automotive; custom processors; electronics, computers and telecommunications; forming and fabricating (non-auto); machinery and equipment manufacturing; medical; metalcutting job shops; petrochemical processors; and plastics and rubber.

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