Economic News Blog
Posted by: Steven Kline, Jr. 11. February 2020

Machine Tool Unit Orders Show Improvement in December

December machine tool orders were 2,253 units and $397,555,000.

December’s unit orders were the highest since March 2019. On top of this, unit orders going back to December 2018 were revised upward a significant amount. This revision occurred mostly in the West and the month of August in the Southeast.

December orders for the month contracted 1.2% compared with year ago. This was the sixth month in a row of contraction and the seventh in the last eight. However, December’s rate of contraction was much slower than the previous four months, which all contracted more than 23%. The annual rate of contraction decelerated to -11.0% from -12.6% this month.

Dollar orders contracted 9.6% compared with one year ago. This was 11th-straight month of dollar order contraction and the 12th in the last 13 months. Like unit orders, dollar-order contraction was significantly slower in December than the previous four months, each of which contracted more than 20%. Unlike unit orders, the annual rate of dollar contraction continued to accelerate, reaching -18.1% in December. December was the seventh month in a row of accelerating contraction in dollar orders.

Nationally and in all six regions, unit orders contracted less than dollar orders in December. It is likely that many builders and distributors were trying to reduce inventory at year end and therefore lowered prices to move machines.

While the GBI: Metalworking has been a negative leading indicator for future machine tool orders for a number of months, the Index is starting to turn. First, the Index was 50.2 in January 2020, which was the first month of growth and the highest level for the Index since June 2019. Second, the month-over-month rate of change in the Index has contracted slower for three months, meaning the annual rate of contraction is very close to a bottom. Third, the month-over-month rate of change in the backlog index contracted at a generally decelerating rate for the fifth month, leading the annual rate of contraction in backlogs to contract at a slower rate for the first time since it began contracting in March 2019.

Other positive signs for machine tool orders include the monetary base contracting at a decelerating rate, decelerating growth in the exchange rate for 4-7 months (depending on the rate used), and a generally lower interest rate.

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