COVID’s unique impact on the manufacturing economy and beyond means that the normal interpretation of diffusion indices around the world needs a re-think. The breakdown of supply chains has distorted the reading for supplier deliveries, causing the GBI and other indices like it to register inflated readings. The solution to this is to watch the index components independently with added attention given to new orders and production.
In general, the trend in the year-over-year change in the real 10-year Treasury was moving down (more negative) the last six years, which was a positive sign for durable goods manufacturing.
In July, durable goods capacity utilization was 68.1%, which was the third month in a row the rate of capacity utilization moved higher.
Compared with one year ago, the index contracted 9.8%, which was the third month in a row that the month-over-month rate of change in the index decelerated and the first month the rate of change contracted less than -10.0% since March.
This was the fourth consecutive month that the month-over-month rate of change was faster than 44%. However, the rate of growth decelerated for the second straight month.
While June’s rate of contraction was still a fast rate of month-over-month contraction, it was a slower rate of contraction than the previous two months.
The month-over-month rate of contraction in machine tool unit and dollar orders slowed sharply in June. The annual rate of contraction may be near or at a bottom.
New orders for real durable goods totaled $225,331 million in June. This was more 25-40% more than April and May when many states closed their economy.
The month-over-month rate of growth for durable goods spending was 11.7%, which was the fastest rate of growth since July 2005.
In June, real disposable income was $16,028 billion, which was 8.1% more than one year ago. The extreme month-over-month rate of growth in disposable income is a direct result of government payments to individuals.
The Gardner Business Index reported its third month of slowing contraction in July.
Permits filed in June were up 11.7% compared with one year ago, returning to double-digit growth after two months of contraction.
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