European Machine Tool Builders Warn of Slowdown

Fears of EU default, recession appended to strong 3Q results from VDW, CECIMO

As speculation builds about the possibility of a European recession, two recent reports suggest sales of machine tools are slowing in the EU. The German Machine Tool Builders’ Assn. (VDW) reported its members’ face slower growth than the robust level of demand that has been recorded through much of this year; and CECIMO, the European Association of the Machine Tool Industries, said “the dire outlook of the financial sector is now overshadowing the very positive outcome from EMO, the world’s premier machine tool exhibition. The uncertainty in the financial markets is spreading to the industrial sectors and might influence the growth rates in 2012.”

By contrast, the latest U.S. Manufacturing Technology Orders report from the American Machine Tool Distributors’ Assn. and The Association For Manufacturing Technology found that domestic manufacturers ordered $606.56 million worth of machine tools and related equipment during September, a 22.9% improvement over the comparable figure ($460.61 million) for August, and a 51.9% rise over the total recorded for September 2010. The 2011 nine-month total for U.S. new orders is $4.074 billion, a rise of 91.9% versus the January-September 2010 period.

In Germany, VDW said new orders for machine tools during the third-quarter of 2011 began to show some slowness following a very robust first half of the year. Even so, the January-September 2011 period delivered a 74% year-on-year increase for VDW members. “The increase in order bookings for the ongoing year continues to be excellent,” confirmed Dr. Wilfried Schäfer, executive director at the VDW. However, Schfer added that the group’s members’ rate of growth dynamic is declining on a quarter-to-quarter basis, particularly since the start of the third quarter.

Furthermore, VDW members’ capacity utilization rate rose to 95.5% during October of this year, a remarkable increase over the 75.4% capacity utilization rate for October 2010. And, total output for VDW members has increased 36% during the January-September 2011 period, over the year earlier. “Over the year as a whole, we look like doing better than hitherto expected,” Schfer said. The VDW predicted the full-year production output will grow by 33% for 2011.

However, VDW members have lowered their expectations for the months ahead, according to the organization. It cited financial market uncertainties, especially the euro’s debt crisis, companies’ expectations for the months ahead are gloomier across e board. “These exogenous factors are superimposed on the normal cyclical demand trend,” according to Sch äfer. He said the effects will vary among machine tool manufacturers: companies producing customized machines, those operating with long lead-times, and those that specialized in supplying the automotive, energy, and aircraft sectors will enjoy a higher level of stability.

According to CECIMO, the current situation in the financial markets is a threat to the manufacturing sector, because it limits banks ability or willingness to lend to the builders and their prospective customers. “Taking money out of the system will inevitably hurt the industry,” the group stated.

However, the organization still has positive figures to report for 2011. Its members have enjoyed “exceptionally strong growth in orders’ intake” for most of 2010 and through the year-to-date, for the European machine tools observed in 2010 and throughout most of 2011 sets a strong foundation for the dynamics of CECIMO output. European machine tool builders have increased their output by a value of €4.1 billion ($5.5 billion) during this year versus 2010, a 25% increase to a total market value of €20.7 billion ($15.5 billion.)

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