Cutting Tool Orders Nearing a Bottom

Recent changes in the Gardner Business Index indicate that the annual rate of contraction in cutting tool orders is nearing a bottom.

In July 2020, real cutting tool orders were $137.8 million, which was the second lowest order total since orders began to be reported in January 2012. Compared with one year ago, cutting tool orders contracted -31.2%, which was the 17th consecutive month of month-over-month contraction. July was the third time in four months with a month-over-month rate of contraction faster than 30%.

The annual rate of change contracted at an accelerating rate for the 10th month. The annual rate of contraction was 15.9%, which was the fastest rate of annual contraction since the data was made public. At the beginning of 2020, the Gardner Business Index: Metalworking indicated that the annual rate of contraction in cutting tool orders would bottom out in the summer of 2020. However, the pandemic accelerated the contraction in metalworking and extended the accelerating contraction in cutting tool orders.

The GBI: Metalworking is a good leading indicator of cutting tool orders and leads cutting tool orders by seven to 10 months. In August, the month-over-month rate of change in the index grew for the first time since October 2018. Also, the annual rate of change in the Index has contracted for 18 straight months but the rate of contraction decelerated for the second month in a row. If this is a bottom in the rate of change in the GBI: Metalworking, then a bottom in the rate of change in cutting tool orders likely will happen before the end of 2020.


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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.