September Machine Tool Orders Rose Nearly 23%

Strong equipment sales may indicate wariness over scheduled changes in depreciation rules

Domestic manufacturers ordered $606.56 million worth of machine tools and related equipment during September, a 22.9% rise over the comparable figure ($460.61 million) for August and a 51.9% improvement over the total recorded for September 2010. The results are recorded by the American Machine Tool Distributors’ Assn. (AMTDA) and AMT - The Association For Manufacturing Technology, who together compile the monthly U.S. Manufacturing Technology Orders report based on data submitted from participating companies.

The USMTO report includes actual figures for production and distribution of machine tools and related equipment, including domestic orders and imports, on a nationwide and regional basis.

The new figure brings the 2011 year-to-date total for new orders to of $4,074.00 million, a rise of 91.9% versus the nine-month total for 2010.

“September numbers were the second-highest monthly dollar total in the last 15 years,” observed AMTDA president Peter Borden. “American manufacturers are still rushing to beat the end-of-year bonus depreciation deadline.”

Increases in business investment have remained strong across many industries, and many analysts have attributed the fact to temporary depreciation rules that will begin to change in January 2012. One such rule is the Internal Revenue Service’s Section 179 provision that allows a business to immediately deduct the full expense of qualifying investments, up to a maximum of $500,000 for 2011. The provision will be reduced to $125,000 in January, and drops to just $25,000 in January 2013.

Another incentive for buyers of machine tools may be bonus depreciation rules that currently allow businesses to mark down the full value of a capital investment. That provision will be reduced from 100% to 50%, and eliminated entirely in January 2013.

The strong September orders were mostly maintained in the USMTO’s regional reports. The Northeast region had new orders for manufacturing technology totaling $112.75 million, a 74.6% rise over August orders ($64.56 million) and 71.9% improvement on the September 2010 total. For the year-to-date, Northeast regional orders for manufacturing technology amount to $612.93 million, 65.0% higher than the total for January-September 2010.

In the South, September orders for machine tools and related equipment totaled $78.04 million, an increase of 34.5% over August’s total ($58.03 million) and 16.1% over the September 2010 figure. From January to September 2011, the region’s total for new orders $513.08 million, up 63.2% over the comparable period of 2010.

Results from the Central region show new orders for manufacturing technology climbing 22.4% to $170.82 million in September, from $139.55 million in August, and up 48.1% versus the September 2010 total. The region’s year-to-date total for new orders is $1,098.33 million, a is 92.0% improvement over the first nine months of 2010.

In the West, new orders for manufacturing technology amounted to $69.07 million in September, a 41.9% increase over August ($48.66 million) and a 109.1% rise over the September 2010 figure. For the January-September 2011 period, the region has posted new orders totaling $472.69 million, a 98.0% year-on-year increase.

Only the Midwest region posted a decline in September new orders for machine tools and related equipment, with the total falling 3.7% from $182.55 million in August to $175.88 million in September. The latest figure was, however, a 48.9% increase over the September 2010 total, and the $1,376.97 million on record for the region for January-September 2011 indicates an increase of 119.6% versus the first nine months of 2010.

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