Machine Tool Unit Sales Up 3.4% in October

According to USMTO, machine tool orders in October 2012 were 2,265 units and $413,969,000. Unit sales in October 2012 increased 3.4% compared to October 2011. Month over month, unit sales have increased five of the last eight months. The annual rate of change, at 5.3% in October, continues to slow its rate of growth. This is the first time since May 2010 that the annual rate of change for unit sales has been higher than the annual rate of change of dollar sales. That is because month-over-month real dollar sales have contracted seven of the last eight months. Therefore, the average price of a machine is falling as supply catches up with demand and builders focus their attention on the U.S., which probably has the brightest outlook of almost any machine tool market in 2013.

Two excellent leading indicators for machine tool sales are consumer durable goods industrial production and the U.S. dollar broad exchange rate. The annual rate of change in industrial production has seen decelerating growth the last two months. However the rate of growth is still well above the historical average for industrial production. So, while production may be in for a period of slower growth, the high rate of growth is still largely positive for machine tool sales.

The annual rate of change in the broad exchange rate for the U.S. dollar is growing at an accelerating rate (moving down in the chart below). However, the month-over-month rate of change has barely grown at all the last two months. The Federal Reserve is expected to announce more quantitative easing this week. This could mean that the dollar will start to fall relative to other currencies, which would be a positive for machine tool sales in 2013.