U.S. machine tool orders – for anyone who’s not a manufacturing junkie, could anything sound more boring? And yet, because machine tools of various kinds are what manufacturers use to make a wide range of industrial products, their sales are a key indicator of the sector’s health, and especially its future prospects. After all, if manufacturing companies aren’t feeling optimistic about their businesses, they’re not likely to be ordering many of these generally expensive devices, either to replace worn out equipment or add capacity. If orders are rising strongly, that’s strong evidence that industrial production is likely to strengthen or at least remain strong.
And even if you don’t care much about manufacturing, machine tool orders data speak volumes about whether the economy as a whole is thriving or not – a subject that’s attracted unusual attention lately because the current American recovery has lasted so long, and because some recent statistics are pointing to a growth slowdown – or worse. More specifically, these statistics can reveal whether President Trump’s trade policies are succeeding or failing to achieve one of their prime stated goals – bolstering domestic industry.
The January numbers were released today by the machine tool trade association that tracks them, and the verdict? Thumbs up on all counts. Year-on-year, new business grew by five percent, and there was even a silver lining in the 10.5 percent monthly decline from December levels: January figures almost always fall on a monthly basis (because manufacturers tend to bunch their new orders markedly toward the end of each calendar year), and this January’s decline was half the post-1998 average. In fact, the $396 million figure was the second largest January total in the 22 years during which the industry has been compiling these statistics. Particularly noteworthy: January was the month when most of the last partial federal government shutdown took place. That’s when it was hard to find many Americans optimistic about anything.
Moreover, although these numbers are incredibly volatile month-to-month, the strong surge in machine tool orders that began in early 2017 (coinciding, incidentally, with the advent of the Trump administration) continued apace through 2018 (when he began tariff-ing imports in earnest).
Since manufacturing still only makes up a little less than 11.5 percent of the whole U.S. economy (though it punches way above its weight as a jobs creator), robust machine tool orders are hardly a guarantee against a slowdown – even a significant one. And the future of the President’s trade policy, especially regarding China, remains highly uncertain. But at best, domestic manufacturers’ interest in continuing to buy the stuff that’s used to make other stuff signals that current economic pessimism is a stretch — and that if the economy does run into trouble, neither manufacturing nor President Trump’s approach to trade (which is dominated both ways by industrial goods) will deserve much blame.