Economic News Blog
Posted by: Steven Kline, Jr. 12. July 2016

Machine Tool Orders Down 17 Percent in May '16

In May, machine tool orders were 1,598 units and $272,310,000. In 2016, unit orders are on pace to contact anywhere from 15 to 25 percent. The end result is largely dependent on the last four months of the year. If the industry begins to rebound at IMTS, then the peak rate of contraction will be this summer and 2016 will end up down around 15 percent. However, if the industry weakens to due political or economic events (of which there are many to choose from), then it is quite possible for unit orders fall 25 percent in 2016.

The unit order total in May was the third lowest since August 2010 (only January and April 2016 were lower). Compared with one year ago, unit orders were down 16.9 percent in May. The month-over-month rate of change contracted for the 13th month in a row. In 2016, the month-over-month rate of change has contracted at a double digit rate every month. The annual rate of change contracted for the ninth month in a row. The annual rate of change, now -18.0 percent, contracted at an accelerating rate for the sixth month in a row. My unit order forecast for May was too low by 9.3 percent. Year-to-date my forecast is too low by 12.5 percent, mostly due to March being much better than expected.

Real dollar sales were down 18.1 percent compared with May 2015. This was the 13th consecutive month that dollar orders have contracted. Real dollar orders have contracted at a double digit rate in 10 of the last 12 months. The annual rate of change contracted for the 12th month in a row and at its fastest rate (22.3 percent) in this down turn. 

A couple of regions bucked the trend in May though. In the North Central-West, real dollar sales increased 4.6 percent compared with one year ago. Compared with one year ago, the average price in the region increased five of the last six months. So, dollar orders are performing significantly better than unit orders in the North Central-West while it is the reverse for the industry as a whole. In the Southeast, unit orders have increased in two of the five months this year while dollar orders are up in four of those five months. The Southeast is easily the best performing region in 2016.

You can find more on machine tool sales and the leading indicators on our metalworking and monetary pages.

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