August Machine Tool Orders Above 2,000 Units – Sign of Strong Market

 According to USMTO, machine tool orders in August 2012 were 2,011 units and $425,511,000. This is the 11^th time in the last 13 months that orders have been above 2,000 units, which is historically a sign of a very strong machine tool market. However, August was the second month in a row that orders contracted compared to the same month one year ago. In August 2012, orders were 4.1% below the level of orders in August 2011. This is an increase in the rate of contraction in the one-month rate of change. The annual rate of change is still growing, but it has been growing more slowly since May 2011.

The annual rate of change in the broad exchange rate for the U.S. dollar is growing at an accelerating rate (moving down in the chart below). When the dollar is gaining value relative to other world currencies, machine tool orders tend to contract. This indicator is pointing to slower machine tool sales in 2013. But, the Fed’s announcement of further quantitative easing should cause the dollar to lose value relative to other currencies. Therefore, we could see this indicator begin moving in the other direction in 2013 and be supportive of stronger machine tool sales.