Machine tool orders continue to rise

Staff -- Industrial Distribution, 8/1/2005

A report issued in early July found that U.S. machine tool consumption grew in May, sustaining that sector's marked improvement over the past year.

The report, co-sponsored by the American Machine Tool Distributors' Assn. and the Assn. for Manufacturing Technology, showed that U.S. machine tool demand in May was $249.79 million—a 4.4 percent gain over April. Demand also rose by 22.7 percent over May 2004.

Overall demand for the first five months of 2005 increased by 17.9 percent, at $1.204 billion, up from $1.021 billion in the first five months of 2004.

"Steady capital investment from U.S. manufacturing continues to drive machine tool orders," said Ralph Nappi, president of AMTDA. "The machine tool industry is back, although certainly not to what it was in its hey-day of 1998–99. Last year was strong, as is this year. The business is much better."

The machine tool report is generally based on a survey of approximately 200 manufacturers, distributors and importers of machine tools that represent 76 percent of the machine tool market.

Bankruptcies have decreased over the past couple of years, but Nappi admits that, "this is a recovery that is not floating all boats. The fact is that it's good for many companies, but not for all of them. The downturn from 1999–2003 was pretty deep for many. And there will continue to be mergers and consolidations as well as companies going out of business."

Nappi estimates that 75 percent to 80 percent of machine tools sold in the United States are imported, and have been for many years. And while these latest numbers please Nappi, it is the foreign influence on U.S. manufacturing that still concerns him.

"What hurts most is the exporting of manufacturing," Nappi said. "There's just not as much manufacturing happening in the United States as there once was."

Tool demand increased in the Midwest, where it climbed by 34.3 percent, and the Central region, where it increased by 8.7 percent. However, tool purchases fell by 27.7 percent in the Northeast, 10.3 percent in the West and 4.3 percent in the South.

"The five regions are all showing activity related to increased business conditions, but vary in degree based on manufacturing sectors within each [area]," Nappi said.

Earlier in July, the U.S. Commerce Department reported that factory orders had increased by 2.9 percent in May. Total U.S. durable goods orders were up 5.5 percent, primarily in the area of transportation equipment.

Despite the good news, Nappi is restrained in his optimism for the rest of the year.

"It is likely the second half of the year will yield a more deliberate and cautious approach to capital investments due to increasing energy costs, labor negotiations, and the inability of Congress to address manufacturing issues," he explained.