December GBI at 51.5 – Growth Slowly Accelerating

With a reading of 51.5, the Gardner Business Index showed that durable goods manufacturing grew for the 12^th consecutive month and for the 14^th time in the last 15 months. The index showed that manufacturing grew at a slightly accelerating rate in the fourth quarter of 2014. Compared to one year ago, the index grew at its fastest rate since September. The annual rate of growth decelerated for the third month in a row but is still at a healthy 7.7%.

New orders grew for the 15^th month in a row. The rate of growth has been relatively flat since July. Production expanded for the 12^th month in a row. The production index was just barely above its lowest level of 2014. Backlogs contracted for the ninth month in a row. The backlog index has trended up very slightly since September. Compared to one year ago, the backlog index increased after contracting last month. The annual rate of change in backlogs has grown at a slower rate for four months, which indicates that the rate of growth in capacity utilization should peak around the end of the first quarter in 2015. Employment has increased for 16 straight months but has seen relatively flat growth since August. Exports contracted for the eighth consecutive month due to the relative strengthening of the dollar. However, the rate of contraction was much slower the last two months of the year. Supplier deliveries lengthened at their fastest rate since August. Material prices continue to increase but the rate of increase was the slowest since November 2012. Prices received have increased for eight months in a row, which is the longest stretch of price increases since the summer of 2012. Future business expectations continued to rebound. They are at their highest level since March.

Larger facilities saw a significant increase in their rate of growth in December. However, plants with fewer than 100 employees saw weaker business conditions last month. Plants with 50-99 employees grew modestly. Facilities with 20-49 employees contracted for just the second time in 2014. Plants with fewer than 20 employees barely contracted.

With the steep fall in oil prices, the South Central ended its run as the strongest region at six months. In fact it contracted in December along with the North Central - West. The North Central – East was the fastest growing region this month. It was closely followed by the Southeast, and West. The Northeast expanded at a very moderate rate.

Aerospace was the fastest growing industry in December. Its rate of growth has shot up the last two months. It was followed by electronics/computers/telecommunications, machinery/equipment, pumps/valves/plumbing products, Custom processors, automotive, and metalcutting job shops. Primary metals and forming/fabricating (non-auto) contracted for the first time in a number of months. The medical index has collapsed in recent months.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. The plastics industry grew at the fastest rate for the second month in a row. It was followed by composites, metalworking, and screw machining. Moldmaking and finishing contracted this month.

Planned capital expenditures fell to their lowest level since November 2012. They contracted month over month by more than 10% for the fifth time in six months. Annually, future capital spending plans contracted for the second month in a row.