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Machine Tool Orders Drop Again, But Recovery Seen

Jan. 14, 2020
U.S. machine shops capital equipment orders fell -14.9% from October to November 2019, to $320.4 million for the month, but the U.S.-China trade deal and the USMCA offer hope of a trend reversal by the second half of 2020.

U.S. machine shops and other manufacturers' new orders for capital equipment fell -14.9% from October to November 2019, totaling $320.4 million for the month, according to the latest U.S. Manufacturing Technology Orders. That figure represents a -29.3% decrease in new orders from November 2018, and brings the 11-month, 2019 total for manufacturing technology orders to $4.1 billion, a decrease of -18.6% compared to the January-November 2018.

“This figure is in line with expectations we’ve had since January that 2019 spending would be about 20 percent lower than in 2018,” stated AMT president Douglas K. Woods. “Given how strong a year 2018 was, current dollar volumes are still healthy compared to the average over the past ten years.”

Despite the widespread decline in new order volume, Woods offered several reasons to expect that the manufacturing-technology market would begin to recover during the second half of 2020. The U.S.-China trade deal, which will significantly increase Chinese imports of U.S. agricultural products, will lead to increased investment for agriculture equipment," he predicted. "Anticipated approval of USMCA will increase trade throughout North America and lead to new investment in key capital-intensive industries.”

The USMTO report published each month by AMT-The Assn. for Manufacturing Technology offers a leading indicator of manufacturing of industrial demand as machine shops and other manufacturers invest to complete planned or anticipated production programs. AMT reports nationwide and regional data for orders of metal cutting and metal forming and fabricating equipment, based on data supplied by participating producers and distributors of that equipment.

“November’s drop in the dollar value of orders by 15% percent while units fell by only 3% reflects an aggressive move by sellers to reduce inventory before the end of year," Woods explained. "The dollar volume would have been lower if not for the growth in orders for complex machines, as larger manufacturers returned to the marketplace."

He continued: “Another contributing factor to lower November orders was the tax reform enacted in 2017, which established a clear set of rules on tax incentives through 2022. This created a stability that has leveled investments in capital equipment across the year, and eliminated the year-end rush to place orders."

In the USMTO regional results, manufacturers in the Northeast recorded $62.76 million worth of new orders for metal-cutting equipment during November, a drop of -9.6% from October and of -33.8% from November 2018. The region's YTD total through November is $775.1 million, a decline of -12.8% versus the comparable period of 2018.

In the Southeast, November new orders for metal-cutting equipment slipped -7.2% from October to $43.6 million. That indicates a -21.4% dip from November 2018, and a -20.8% YTD decline.

The North Central-East region had total manufacturing technology new orders of $72.5 million during November, -31.4% from October and -28.7% from November 2018. Through 11 months of 2019, the region's new orders totaled $977.71 million, which is down -13.9% from the January-November 2018 result.

The North Central-West region's November total for manufacturing technology new orders was $53.16 million, off the October total by -12.3%, and down -31.0% from the November 2018 result. The 11-month total for the region is $702.63 million, down -31.8% from the previous year's YTD result.

In the South Central region, November new orders for metal-cutting equipment fell -9.0% from October to $20.4 million, and that further represents a -40.0% decline from the November 2018 result. For the January-November period, the region's new order total is $333.41 million, a -27.9% decline from 2018.

The West region's November total for new orders of metal-cutting equipment is $60.02 million, a -6.1% decline from October and a -28.9% decline from November 2018. Through 11 months of 2018, the region's metal-cutting equipment new orders totaled $731.24 million, a -12.2% decline from the previous year's figure.