GBI for July: 45.5

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With a reading of 45.5, the Gardner Business Index showed that business conditions in durable goods manufacturing contracted at a slightly slower rate in July than the previous month. However, the index remained on its downward trend that began at the beginning of the second quarter of this year.

New orders contracted faster for the fourth month in a row, although the rate of contraction slowed somewhat in July. Production also contracted for the fourth month in a row. The backlog index moved up from last month, but it has contracted for 28 straight months. Employment declined for the fourth month in a row. Exports have contracted since the summer of 2014. Supplier deliveries lengthened for the sixth month in a row.

The material prices index increased for the fifth consecutive month. However, in July material prices increased at a slower rate for the first time in the last five months. Prices received continued to decrease, but the rate of decrease has slowly decelerated since November 2015. Future business expectations were unchanged from last month and remained near their lowest level of the last three years.

Plants with more than 250 employees contracted for the second month in a row. Facilities with 100-249 employees have contracted every month but one since September 2015. Facilities with 50-99 employees contracted for the second time in four months. Companies with 20-49 employees contracted for the fourth month in a row. Companies with 1-19 employees have contracted since June 2015.

Every region contracted for the second month in a row. The Southeast was the strongest region for the eighth time in the last nine months. In July its index was 49.0. The North Central-West, North Central-East, Northeast, and West contracted at similar rates to each other and have contracted for at least the last three months. The South Central lagged behind.

Only four industries expanded in July. Furniture was the fastest growing industry and was followed by medical, custom processors, and aerospace. Ship building was unchanged in July. The contracting industries from slowest to fastest were machinery/equipment, petrochemical processors, HVAC, electronics/computers/telecommunications, primary metals, hardware, automotive, military, forming/fabricating (non-auto), off-road/construction machinery, plastics/rubber products, other manufacturing, metalcutting job shops, industrial motors/hydraulics/mechanical components, power generation, pumps/valves/plumbing products, and oil/gas-field/mining machinery.

In addition to the overall durable goods index, we compute indices for a number of technologies or processes. All technologies contracted for the fourth month in a row. From slowest to fastest contraction they were composites, plastics, metalworking, finishing, moldmaking, and precision machining.

While planned capital expenditures for the next 12 months remained below average, they increased almost just over 25 percent compared with one year ago. That was the fourth straight month that the month-over-month rate of change increased. Therefore, the annual rate of change has contracted at a decelerating rate for five months, and the annual rate of contraction was at its slowest rate since March 2015. This is a positive sign for future capital equipment investment.