The annual rate of growth in durable goods production is likely to decelerate even more as the month-over-month rate of growth has been relatively weak the last six months. Further, the key leading indicator of production – new orders of durable goods – is indicating slower growth in industrial production.
Compared with one year ago, durable goods production contracted 0.4% in September.
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The backlog index tends to lead the annual rate of growth in capacity utilization by seven-to-10 months. It has contracted since March and is indicating that capacity utilization will contract in 2020.
Capacity utilization in durable goods contracted 1.9% compared with one year ago.
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The Index is clearly indicating that the annual rate of growth in cutting tool orders will continue to decelerate, if not begin to contract, for the remainder of 2019.
August cutting tool orders contracted 10%, which was the fastest rate of contraction since July 2016.
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The low and falling change in the real 10-year Treasury rate is a positive signal for that the rate of change in real durable goods new orders should bottom out soon.
This as the ninth consecutive month the year-over-year change in the 10-year Treasury rate was negative, and it was virtually unchanged from last month.
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