January Machine Tool Orders Down Just 0.5%
According to USMTO, machine tool sales in January were 1,912 units and $338,190,000. Unit sales in January 2013 were just 0.5% less than they were in January 2012. This was the second month in a row that the month-over-month rate of change contracted. However, unit sales were in line with my forecast of 1,925 units. Therefore, my January forecast was too high by just 0.7%. Annually, unit sales continue to grow at a decelerating rate. My current forecast calls for the annual rate of change to bottom out 2.1% in February. This is assuming that machine tool sales show some moderate growth over 2012 through April with the growth rate comapred to 2012 moving higher in May through August. I expect the month-over-month growth rate to moderate from September through December.
In every presentation and forecast, I have said that unit sales would do better than real dollar sales in 2013. This is primarily due to softening demand and increased competition in the U.S. market by machine tool builders because the U.S. would be one of the strongest machine tool markets in 2013. The last few months have shown this to be the case. Month-over-month, real dollar sales have contracted at double digit rates for the last three months and they have contracted seven out of the last eight months. In contrast, unit sales have contracted just three times in those same eight months and two of those instances saw unit sales contract just 0.5% or less. Annually, real dollar sales have contracted faster the last two months. And, the average price of a machine has contracted faster each of the last five months, a sure sign of softening demand and increased competition.
Based on the leading indicators, I'm still confident in my unit forecast. And, if my unit forecast proves correct, there should be some stability in machine tool prices. One leading indicator of machine tool sales I follow is durable goods production. Annual growth in durable goods production has slowed, but it is still well above the historical average. Also, month-over-month growth rates have remained relatively flat. Durable goods production is at least neutral for future for machine tool sales.
Another good leading indicator is Gardner's metalworking business index. Business activity at metalworking shops has improved significantly since November 2012. If business activity continues to improve, then the annual rate of change of the index should bottom out in the March to May time frame. This would be a positive sign for machine tool sales.
Perhaps the best news for future machine tool sales is the trend in average spending per plant on future capital equipment expenditures from our metalworking business index. In February, the average spending per plant was at its highest level June 2011. Also, the February average was higher than the December average (which marked the end of a six month downtrend) by 39.5%. The annual rate of change has accelerated the last two months, which is a very positive sign for machine tool sales.
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