Economic News Blog
Posted by: Steven Kline, Jr. 17. July 2013

Machine Tool Sales Contraction Moderating

According to USMTO, machine tool sales in May were 2,007 units and $376,305,000 in real dollars. Unit sales in May 2013 were just 1.8% less than they were in May 2012. This is the fifth time in the last six months that unit sales contracted month over month. However, this is the slowest rate of contraction for those five months. The annual rate of change contracted for the second month in a row, but the rate was virtually unchanged from last month and is just barely below zero.

My unit forecast for May was for 2,300 units to be ordered. This was too high by 14.6%. Year to date, my forecast is too high by 10.8%. I expected machine tool sales to start turning around more significantly in March. Currently, it looks like unit sales will end 2013 flat to slightly below 2012 levels. 

Real dollar sales contracted month-over-month for the 10th time in 12 motnhs. But, the rate of contraction was somewhat slower in May. The annual rate of change has contracted for six straight months and continues to accelerate. However, the average price of a machine is contracting at a slower rate month-over-month than it was in late 2012 and early 2013. Annually, the rate of change has been below its peak rate of contraction for the last three months. Buyers are beginning to lose some of their pricing power as supply comes into better balance with demand. Historically, the average price of a machine leads real dollar sales. If the average price of a machine continues to contract more slowly, this would be a positive indicator for future machine tool sales.

There are also positive signs in capital goods new orders, which are contracting more slowly on an annual basis the last two months. Capital goods new orders are generally a good leading indicator for durable goods production and machine tool sales. Many of the leading indicators are pointing to stronger machine tool sales in 2014 and possibly 2015.

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


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