Economic News Blog
Posted by: Steven Kline, Jr. 10. September 2019

July Shows Mixed Results in Machine Tool Orders

July machine tool orders were 1,959 units and $373,120,000.

Unit orders for the month contracted 3.3% compared with one year ago, marking contraction for the sixth straight month and seven of the last eight months. Annually, unit orders continued to grow at a slower rate, but they are likely to contract next month.

Unit contractions in the West, South Central, North Central-West, and North Central-East were relatively close to the national average. The Northeast recorded a much sharper contraction in July, falling 15.3%. The Southeast was the only region to grow compared with one year ago, increasing by 27.6% in July.

Dollar orders contracted 4.1% compared with one year ago, mirroring unit orders by contracting for the sixth straight month and seven of the last eight months. However, the dollar contraction in July was much slower than the previous five months. Annually, dollar orders contracted at an accelerating rate of the second month.

Regional performance in dollar orders was far more varied than unit orders. While the Southeast was the only region with growing unit orders, dollar orders contracted 7.9%. The Northeast and North Central-West saw dollar orders contract much more than national average. Meanwhile, the West, North Central-East, and South Central all had dollar order growth in July despite unit order contractions.

Industrial production and capacity utilization recorded decelerating growth for the fifth and sixth consecutive months, respectively. Additionally, both the money supply and the GBI: Metalworking have been negative leading indicators for future machine tool orders for a number of months. On the positive side, the change in the real 10-year Treasury rate has moved in a positive direction for capital equipment for several months. It is likely that machine tool orders will see an annual rate of contraction next month and that orders will contract overall in 2020. However, IMTS, taking place in September 2020, tends to be a turning point for machine tools and could be the point at which the rate of contraction bottoms next year.

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