Economic News Blog
Posted by: Steven Kline, Jr. 11. August 2015

June Machine Tool Orders Contract 13.1 Percent

In June, machine tool sales were 1,905 units and $344,534,000. Compared with one year ago, unit orders contracted 13.1 percent. This was the fastest rate of contraction since November 2009, excluding September because of the IMTS effect. And, this was the fourth time in six months that unit orders have contracted. The annual rate of change continue to decelerate and is now growing at its slowest rate since August 2014. My revised unit forecast was too high by 19.4 percent. Currently, I expect unit orders to contract about 5 percent in 2015. However, this is with orders above 2,000 units every month. This would be a significant increase over the first half of the year. If that doesn't happen then unit orders could be down 10 percent in 2015.

Real dollar sales also contracted 14.6 percent in June. This was the fifth time in seven months that real dollar orders have contracted month-over-month. The annual rate of change has contracted minimally for three straight months. Currently, I expect dollar orders to contract by 10 percent in 2015.

The real oil price and US dollar exchange rate are two key reasons for the weaker than expected machine tool market in 2015. And, both indicators are pointing towards a typical contraction in the machine tool market for 2016. As a reminder, the average machine tool contraction is about 25 percent. The first chart below shows that when the oil price contracts at its current rate then machine tool unit orders typically contract at least 20 percent. The second chart below shows that when the dollar appreciates this fast then machine tool unit orders typically contract at least 20 percent and sometimes closer to 40 percent.

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

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