“Machine tool orders” may sound pretty wonky, even if you care more about manufacturing than the typical American. Even I haven’t covered them regularly. Actually, though, it’s a key measure of the domestic industry’s health, which is why it’s important to report that the latest results from this data series have just hit a five-year low.
According to the Association For Manufacturing Technology (AMT), a U.S. machine tool industry group, orders for these systems totaled only industry $285.92 million in August . That’s the lowest monthly total since August, 2010. This figure also represented a 10.20 percent drop from the previous month, and a whopping 21.20 percent nosedive over August, 2014. Just for good measure, these latest orders dragged the January-through-August total for this year – $2.77 billion – 10 percent lower than the comparable amount for last year.
I was also struck, moreover, by the downbeat assessment of AMT President Douglas K. Woods. If you’re familiar with AMT’s reports, you know that Woods is a dedicated optimist – which mirrors the can-do attitude common among American manufacturers. But although Woods did stoutly maintain that the machine tool business (his group includes distributors as well as producers) was experiencing a “leveling after a period of strong growth” – which the chart accompanying the figures doesn’t bear out – he also noted “ a sense of unease in manufacturing now as indicated by this reduction in orders combined with drops in the PMI and industrial production” and allowed that “there is some cause for caution.”
It’s important to note that “machine tool orders” is not the same as “machine tool production,” and the AMT specifies that these numbers include both U.S.-made and imported equipment. (In fact, the sector’s trade deficit has generally been rising for literally decades.) But since machine tools are so widely used throughout the domestic manufacturing sector, even higher imports of foreign machine tools signal that American-based industrial companies are expecting more business and gearing up for it, or at least that they feel financially healthy enough to upgrade their factories. Woods’ confidence that the worst is over notwithstanding, this five-year low in machine tool orders is sending exactly the opposite message.
Fortunately, we won’t need to wait much longer for more conclusive reads on the manufacturing winds. On Thursday, the New York and Philadelphia Federal Reserve Banks will issue their October soundings on manufacturing activity in their regions, and on Friday, the Fed in D.C. puts out the September industrial production figures. Look out below?