The U.S. Manufacturing Technology Orders report (USMTO) showed that order values grew 2.2 percent in November 2015 compared to the previous month, according to AMT-The Association For Manufacturing Technology. Year to date, orders were down 17.2 percent compared to the same point in 2014.
While total order value saw a monthly gain, the number of units sold dropped 16.31 percent. This data suggest that manufacturers are increasing their use of automated equipment to add productivity and lower costs, rather than expanding their operations and capacity.
"A significant portion of global manufacturing is experiencing slower growth, especially China, and we continue to struggle with the impacts of a stronger dollar," said AMT President Douglas K. Woods. "Investing in productivity and automation technologies is one way that manufacturers look to stay competitive in a softer market, especially as pricing moderates for finished manufactured goods."
The industries that made the most investment in equipment measured by USMTO included automotive, appliances, HVAC, and computers and electronics – a trickle-down effect of the growth seen in new housing starts throughout 2015. Growth in the computer and electronics industry also stems from expansion in data centers as demand grows for cloud-based computing services.
Automotive sales saw a record-setting year in 2015, but increasing interest rates could put some curbs on spending for new vehicles in 2016. Congress also poised manufacturing for success in 2016 on two fronts: By passing a two-year budget deal that ends sequestration and greatly reduces the risk of a government shutdown, and by restoring important tax incentives for capital equipment purchases that expired at the end of 2014.
"In addition to the benefits that come from these tax incentives – specifically 50 percent bonus depreciation and permanent Section 179 expensing – we are hopeful that this will accelerate the replacement cycle for equipment that we are expecting in 2017 and 2018," Woods said. “The prolonged decline in orders we saw through 2015 is anticipated to give way to an upturn at the end of 2016."
November 2015 manufacturing technology orders totaled $329.76 million, which included orders for 1,795 units at an average value of $329,758 per unit. The total order value represented a 13.8 percent decline compared to November 2014. Year to date, orders for 2015 totaled $3,777.98 million, a drop of 17.2 percent compared to the $4,561.40 total at the same point in 2014. This data is a reliable leading economic indicator as manufacturing industries invest in capital metalworking equipment to increase capacity and improve productivity.