Economic News Blog
Posted by: Steven Kline, Jr. 11. June 2019

Growth in Machine Tool Orders Slows

In April, machine tool unit orders were 1,951, which put orders below 2,000 units for the second time in three months. The 2,000-unit order level is typically the demarcation line between a strong or weak machine tool market. April’s month-over-month rate of change contracted 6.7%, which was the third-straight month of contraction and the fourth in the last five months. While the industry contracted, the Southeast recorded strong growth (more than 16%) and the Northeast recorded modest growth (about 2%).  As a result, the annual rate of growth decelerated for the seventh consecutive month to 3.5%, which was the slowest rate of annual growth since April 2017.

Real dollar orders contracted at a double digit rate for the third month in a row and performed worse than unit orders for the fourth straight month. It appears that builders and distributors  are lowering prices to continue to sell machines, which is a sign of a softening market. In April, real dollar orders contracted 16.0% compared with one year ago. However, the South Central region manage to eke out very minimal growth. The annual rate of growth decelerated for the seventh month in a row to 5.3%, its slowest rate since September 2017.

Industrial production and capacity utilization both recorded decelerating growth for the third consecutive month in April. Additionally, both the money supply and the GBI: Metalworking have been negative leading indicators for future machine tool orders for a number of months. It is clear that machine tool orders are in the midst of a decelerating growth phase and are likely to see an annual rate of contraction later this year.

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