Agie Charmilles says U.S. machine shops busier

“In July, machine shops got busier and the delinquency rate on machine tool leases stayed near an all-time low, about one-third of the rate on home mortgages,” said Harry Moser, chairman of machine tool builder Agie Charmilles (www.gfac.com).

“In contrast to the housing and mortgage markets, which are in such bad shape that they are hurting the rest of the economy, machine shops are getting busier and machine tool leases are solid. Shops are uniformly in good financial shape judged by their ability to pay their bills,” added Moser.

The Agie Charmilles Machining Business Activity Index increased to 65 in July from 60 in June. The Index is created by surveying machine tool users concerning their current business level versus three months earlier (April 2007). Any reading above 50 indicates that business activity has improved. The Index was inaugurated in October 2004. Business activity was strongest in the Plastic Extrusion Die Category and the Central and Midwest regions. Historical data, along with a detailed breakdown of results by geographic region and application/sector, is available at (www.gfac.com/newsroom/businessindex/index.cfm)

The Agie Charmilles/USBEF Machining Industry Financial Strength Index was 526 in July 2007, down slightly from 556 in June 2007, versus 313 in July 2006 and 55 in January 2002, the worst reading on record. Any reading above 100 indicates that US Bancorp Equipment Finance’s (USBEF’s) machine tool lease payment delinquencies (a measure of machine tools users’ liquidity and consistent profitability) are at a rate below the average rate of 1990 to 1999. In July, the 30-day delinquency rate on machine tool leases remained close to the lowest level on record, approaching 1 percent, which is much lower than the 4.37 percent credit card (Source: Moody Credit Card Index) or the 4.95 percent home mortgage delinquency rates (Source: Mortgage Bankers Association). As profitability rises liquidity rises, delinquencies fall and the Index rises. Historical data is available at the Agie Charmilles URL mentioned above.

The approximately 126,000 U.S. companies that use machine tools have about 2 million machine tools and 750,000 to 1,000,000 directly related employees (toolmakers, machinists, operators, programmers, etc.). Almost all mid-size to large manufacturing companies use, and periodically purchase or lease, machine tools. Thus, these indices can give timely insight into the condition of U.S. manufacturing. The Machining Business Activity Index is a coincident indicator of this key manufacturing sector. The Financial Strength lags business activity and leads capital investment.

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