GBI Machine Tool Model Turns to Growth from Contraction

With machine tool orders now complete for 2016, we have updated our machine tool unit forecast model. The model showed a significant improvement in the expectations for 2017. The central forecast calls for an increase in machine tool orders of 6.8 percent in 2017 compared with 2016. This is a dramatic increase in the model forecast as the central forecast after 2016 third quarter data was released was for a contraction of 1.8 percent in 2017 compared with 2016.

According to our latest model, there is almost a 90 percent chance that machine tool unit orders will increase in 2017. The high of the model's 80 percent confidence comes in at 16.6 percent while on the low end the 80 percent confidence comes in -2.4 percent. The model forecasts that there's an 80 percent chance that machine tool unit orders will come within this range in 2017. Note, that the low end of the 80 percent confidence is almost as high as the central forecast in our previous model release.

There were two factors that led to dramatic increase in the forecast. First, net borrowing made turned in July and started increasing whereas it had decreased the previous three months. Second, truck production continued on its upward trend that began back in August.