Highest Machine Tool Unit Sales Since March 2008
According to USMTO, machine tool orders in September 2012 were 2,814 units and $545,065,000. This is the highest level of unit sales and second highest level of real dollar sales since March 2008. And, it is the second highest amount of unit sales since September 1998. Unit orders in September 2012 were 4.3% higher than in September 2011. The annual rate of change for unit sales is still growing, but it has been growing more slowly since May 2011. However, real dollar sales 2012 were 0.1% lower than in September 2011. Compared to the same month one year ago, real dollar sales have contracted four months in a row.
My original forecast for 2012 (from September 2011) forecasted a much smaller bump from IMTS in September. But, my revised forecast for 2012 (from August 2012) forecasted 2,600 units to be sold in September 2012. This forecast was too low by 21.8%. Despite my miss in September, my forecast for the third quarter of 2012 was too low by just 0.9%. The slowing growth in machine tool sales was expected because industrial production, while growing, had been slowing for most of 2011. Industrial production leads machine tool sales by 12-18 months.
The two best leading indicators for machine tool sales are industrial production and the U.S. dollar exchange rate. The annual rate of change in industrial production had been growing faster for 10 straight months, but in September the rate of growth slowed slightly (to 8.65% from 8.73%). Still, the trend in industrial production is a positive indicator for machine tool sales in 2013. Based on industrial production we should see accelerating growth in machine tool sales for most of 2013.
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. In fact, the one-month rate of change in the broad exchange rate was only 0.02% in October and will likely start contracting in November. Therefore, the annual rate of change has most likely hit its peak, which means this leading indicator should turn to a positive sign for machine tool sales in November.
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