Note in the chart above that the last two times the growth rate in backlogs decelerated and crossed under the rate of growth in capacity utilization, the rate of growth in capacity utilization peaked in the next couple of months.

While the rate of growth in the Index has decelerated, which typically signals decelerating growth in cutting tool orders, the index has remained at a very high level since early 2017. The consistently strong growth at metalworking facilities is a likely reason for the recent surge in cutting tool orders, but with the GBI leading cutting tool orders by seven-to-10 months, it is likely that the annual rate of growth in cutting tool orders may have already peaked.

In January, the year-over-year change in the 10-year Treasury rate was -17 basis points, which was the first month the change was below zero since March 2018 and the lowest change since January 2018. The change declined for the second month in a row, indicating that the change in the 10-year Treasury rate has reversed course and is now a positive leading indicator for manufacturing, durable goods, and capital equipment. 

The growth rate in new orders of durable goods was flat for most of the last year, indicating that the accelerating rate of growth in durable-goods production will likely come to an end in the first quarter of 2019.

The GBI: Metalworking has been a negative leading indicator for future machine tool orders for a number of months. With industrial production and capacity utilization still positive, Gardner Intelligence expects that order levels will remain strong, but the rates of growth will continue to decelerate in 2019.