Contraction Continues in Cutting Tool Orders

Cutting tool orders were less than $200 million for the third time in four months, contracting compared with one year ago for the seventh month in a row.

In September, cutting tool orders were $195.3 million, which was the third time in four months that orders were below $200 million. September orders contracted 8.8% compared with one year ago, the seventh consecutive month of contraction. Additionally, the annual rate of growth decelerated for the eighth-straight month to 0.7%.  This was the slowest rate of annual growth since April 2017, which was the last time cutting tool orders contracted at an annual rate. It is very likely that the annual rate of change in cutting tool orders will slide into contraction next month.

The GBI: Metalworking is a good leading indicator of cutting tool orders. The annual rate of change in the Index has contracted for eight-straight months. In the last downturn in late 2015 and early 2016, the GBI: Metalworking contracted more than 10%, year over year, as did cutting tool orders. In October, the GBI: Metalworking showed annual contraction of 10.8%. The Index is clearly indicating that the annual rate of growth in cutting tool orders will contract for the remainder of 2019 and into 2020. The GBI typically leads cutting tool orders by seven-to-10 months.

Reports

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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.

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Gardner Business Index

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