2019 Machine Tool Orders Off to Solid Start

January’s machine tool orders were up 7.0 and 3.3 percent for units and real dollars, respectively, compared with one year ago.

After a strong 2018, machine tool orders in 2019 are off to solid start.

In January, unit orders were 2,180, which was the 10th consecutive month and the 17th time in 18 months that orders were more than 2,000 units – our baseline level for a healthy, strong machine tool market. January unit orders grew 7.0 percent compared with one year ago, which was the second time in three months that the one-month rate of change grew. However, the one-month rate of growth generally grew slower in the second half of 2018. Therefore, the annual rate of growth peaked in September and has decelerated since, falling to 8.3 percent in January.

Dollar orders performed a little worse than unit orders in January, growing 3.3 percent compared with one year ago. In absolute terms, real dollar orders were low enough that the average price of a machine was the second-lowest since January 2018 and noticeably below the historic average. Again, the market is strong, but growth is slowing as the annual rate of growth in dollar orders slowed for the fourth month in a row to 13.5 percent.

Performance varied across the regions:

In the West, unit orders contracted for the third time in four months, while dollar orders contracted for the first time since June 2018.

In the South-Central region, unit and dollar orders contracted for the third time in four months, but the contraction in dollar orders was particularly strong, contracting more than 24 percent in each of the three months.

The North-Central-West saw unit orders contract for the fourth month in a row. Interestingly enough, dollar orders grew in January.

The North-Central-East had growth in both units and dollars after three-straight months of declines in both.

The Southeast was the standout region for the month. Unit orders grew 45 percent, growing more than 20 percent for the fifth time in six months. Dollar orders increased 44.4 percent, also growing for the fifth time in six months.

The Northeast continued its run of growth with unit orders growing for the seventh consecutive month and dollar orders growing for the 13th consecutive month. Both of those are easily the longest active streaks for any region.

While industrial production and capacity utilization continue to be positive leading indicators for future machine tool orders, both the money supply and the GBI: Metalworking have been negative leading indicators for future machine tool orders for a number of months. My expectation is that order levels will remain strong, but rates of growth will decelerate in 2019.

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