Gardner Intelligence Blog

March Machine Tool Orders Back Above 2,000 Units

In March, machine tool unit orders were 2,281, pushing orders back above 2,000 units after dipping below that level in February. Typically, when orders are above 2,000 units the machine tool market is strong. While that is the case currently, the rate of change is contracting, as March’s unit orders were down 11.7% compared with one year ago. March was the fourth month of contraction in the last six months, with only the North Central-East and Northeast having had an increase in unit orders in March compared with one year ago. As a result, the annual rate of growth decelerated for the sixth consecutive month to 5.2%.

For the third month in a row, real dollar orders performed worse than unit orders. In March, real dollar orders contracted 20.8% compared with one year ago, also the fourth month of contraction in the last six months. Only the Northeast had an increase in real dollar orders in March compared with one year ago, but the increase was just 0.3%. The annual rate of growth decelerated for the sixth month in a row to 7.2%, its slowest rate since December 2017.

Durable Goods Orders Contract for Second Month

New orders for real durable goods in March totaled $280,110 million, which was the highest order level since March 2018. However, compared with one year ago, new orders contracted 2.2 percent for the second month in a row. These are the first months of contraction since June 2018. The annual rate of growth decelerated for the fifth month in a row, moving from 4.5% to 3.6%. This was the slowest rate of annual growth since November 2017.

New orders for motor vehicles and parts grew 3.8% in March compared with one year ago. The annual rate of growth accelerated slightly to 6.1%, but it is likely that the annual rate of growth will decelerate soon. 

The Gardner Business Index (GBI) moved slightly lower in April to 52.9, marking the fourth consecutive month of slowing growth since January when the Index registered 53.9. The Index has fallen 10.7% from the same month one year ago. For context, all Index readings above 50 indicate manufacturing activity expansion, while values below 50 indicate contracting activity and a reading of exactly 50 indicates no change in activity from the previous month. Gardner Intelligence reviewed the underlying data for the month and observed that the Index – calculated as an average of its components – was supported by supplier deliveries, production and employment. The components which lowered the Index included backlogs and exports. New orders also lowered the Index, as it registered slightly below the average of the components. Both backlogs and exports contracted during the month.

According to the GBI, manufacturing activity between the end of 2018 and the present has been consistently driven by activity in production and supplier deliveries, with new orders and employment supporting it to a lesser degree. One significant change in the manufacturing sector in the year-to-date period has been in backlog activity, which a year ago was near record-high levels of expansionary activity and in recent months has contracted to levels last seen in late 2016. That backlogs have transitioned from strongly expanding to modestly contracting is not in itself concerning, as indefinitely expanding backlogs would indicate continually unbalanced supply and demand. Since early 2018, many of the Index’s components have reported slowing growth, a situation which may be more appealing than one of rapid and volatile sector expansion and contraction. Gardner’s 2019 outlook continues to be one of measured optimism for the sector due to a relatively strong domestic economy and low unemployment.

2018 Global Machine Tool Consumption Up 4.8%

On the surface, the findings of Gardner Intelligence’s latest World Machine Tool Survey portray a seemingly ordinary year for the machine tool industry. Scratch the surface, however, and we find something remarkable happening: major geographic regions for machine tools are moving in very different directions.

According to the latest survey, the results of which have recently been published, global machine tool consumption increased $4.1 billion, or 4.8%, to $91.9 billion in 2018. This made 2018 an apparently ordinary year, as the median annual increase in global machine tool consumption since 1961 is 4.2%.

According to the Federal Reserve, nearly 70% of all U.S. economic activity is generated by consumer spending. According to the latest consumer spending data which included December of 2018, total consumer spending growth grew 2.8% during the calendar year. This is nearly identical to the latest reading of 2018 U.S. GDP growth of 2.85%, also reported by the Federal Reserve. 

Gardner’s analysis of Wall Street data for the consumer cyclical sector can be generally classified under two industries; the first being Apparel and the second Home Furnishing, Fixtures, and Household Products, which will be referred to as “Home Goods.” The financial trends within these two industries over the last three years illustrate very different histories. In particular, the aggregated financial data provided by firms in the Home Goods industries suggests that the industry increases capital expenditures after experiencing an increase in free cash flows. Conversely, in the relatively short time period studied the Apparel industry’s free cash flow position, in general, does not appear to induce a similar change in capital expenditures.

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Top Shops

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World Machine Tool Survey

An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.

Capital Spending Survey

An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more.

Gardner Business Index

A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.