Recession Factors Show in U.S. Machine Tool Orders

Sep 14, 2019

Larger manufacturers are putting off CapEx and addressing capacity needs by outsourcing production to job shops, according to AMT

U.S. machine shops’ and other manufacturers new orders for capital equipment increased from June to July, up 7.1% from the June total but now -5.1% behind the July 2018 total. Notably, despite the value of the orders increasing, the unit total recorded for the most recent month decreased to 2,011 machines, a drop of 145 units from June.

Through seven months of activity for 2019, the machine tool manufacturers have booked $2.635 billion worth of metal cutting and metal forming and fabricating equipment, a result that is -11.7% less than the comparable January-July 2018 period.

The machine-tool new orders data is provided by AMT – the Assn. for Manufacturing Technology in its monthly U.S. Manufacturing Technology Orders Report. The USMTO tracks new orders for metal cutting and metal forming and fabricating equipment as a leading indicator of industrial activity. The report is based on data supplied by participating producers and distributors of that equipment, and offers a leading indicator of industrial demand as machine shops and other manufacturers invest to complete planned or anticipated production programs.

July is just the third month of 2019 to register a month-over-month increase in new orders, but the industry is beset by larger economic uncertainty. AMT noted that the Institute for Supply Management’s August 2019 ISM® Purchasing Managers’ Index fell 2.1 percentage points to 49.1, the first dip below 50 in that index in nearly three years, indicating recession conditions in the manufacturing sector.

“Our industry appreciated the good news that July orders out-paced June. The more interesting fact was that job-shops accounted for nearly a third more of total orders than in 2018,” stated AMT president Douglas K. Woods. “Clearly, other larger manufacturers are putting off CapEx and addressing capacity needs by outsourcing production shortfalls with job shops. We suspect the impetus is the uncertainty with the current market and future economic conditions.”

AMT detailed however that machine-tool orders from the government and defense sector led all other industries in month-over-month increases, but represented just a fraction of total new orders for July. Automotive sector orders increased orders by more than 50% from the June total, and aerospace sector orders increased by more than 20%.

In the regional results, new-order totals in the Northeast for July slipped -1.2% from June to $75.1 million for July. That figure represents a decline of -18.5% from July 2018. For the year to-date, the Northeast region’s new orders for metal-cutting machines stands at $479.4 million, a drop of -8.3% from the seven-month total for 2018.

In the Southeast region, July metal-cutting machine new orders total $31.2 million, -18.0% from June and-5.9% from July 2018. The regional YTD total is $302.24 million, down -5.5% from the 2018 total.

The North Central-East region’s July new order totals rose to $108.54 million, up $29.6 million from June and up 7.7% from July 2018. The region’s seven-month total is $615.05 million, a drop of -12.0% from 2018’s comparable result.

In the North Central-West region, new orders for metal-cutting equipment increased 16.0% from June to $60.9 million, though that is -12.4% behind the July 2018 total. Through seven months of the current year, the region has posted new-orders worth $454.25 million, a decline of -17.3% compared to 2018.

The South Central region reported new orders for metal-cutting equipment down -9.3% from June to $33.86 million. That is a 2.5% increase over the July 2018 result, and brings the 2019 seven-month total to $235.88 million, a -19.8% YTD decline.

Finally, in the West region, new orders for metal-cutting machinery ticked up 1.5% from June to $69.84 million in July. That total is 20.5% higher than the July 2018 result, but it leaves the cumulative total for seven months of 2019 at $474.17 million, a -4.9% YTD decrease.

 

Source: American Machinist