Machine shops busier and more liquid in August

Machine shops grew more rapidly and the delinquency rate on machine tool leases reached an all-time low in August, about one-third of the rate on home mortgages, according to a survey conducted by Agie Charmilles and U.S. Bancorp Equipment Finance.

“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 growing and machine tool leases are solid. Shops are generally in good financial shape judged by their ability to pay their bills,” said Harry Moser, Chairman of Agie Charmilles (www.gfac.com).

The Agie Charmilles Machining Business Activity Index increased to 68 in August from 65 in July. The index is created by surveying machine tool users concerning their current business level versus three months earlier (May 2007). Any reading above 50 indicates that business activity has improved. The index was inaugurated in October 2004 and is the only known monthly index of business activity in U.S. machining industries.

The Agie Charmilles/USBEF Machining Industry Financial Strength Index was 588 in August, up from 556 in July, versus 357 in August 2006 and 55 in January 2002, which was the worst reading on record. Any reading above 100 indicates that US Bancorp Equipment Finance’s machine tool lease payment delinquencies (a good measure of machine tools users’ liquidity and consistent profitability) are at a rate below the average rate of 1990 to 1999. As profitability rises liquidity rises, delinquencies fall and the index rises.

The approximately 126,000 U.S. companies that use machine tools have about 2 million machine tools and 750,000 to 1 million 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 give timely insight into the condition of U.S. manufacturing.