Pat McGibbon, AMT VP – Strategic Analytics, explains the 30 percent decrease in January U.S. Manufacturing Technology Orders.
As expected, January 2016 orders were down 30 percent from December 2015 and are 21 percent lower from January 2015.
For the past 10 years, January orders have averaged 28 percent lower than December, attributable to end-of-year fiscal conditions, sales to reduce inventory, and companies looking to gain tax advantages from investing in new machinery. With Sec. 179 expensing now permanent and bonus depreciation in place for five years, the December bump should be less pronounced than in the past.
Regionally, manufacturing technology orders in the Southeast continue to be strong because the composition of its manufacturing base, primarily auto, aerospace and medical, are also the top three industries driving orders. Auto and aerospace especially have been very strong since the last quarter of 2014. Automakers are positioning to meet the upcoming Corporate Average Fuel Economy (CAFE) standards and introducing an unusually large number of new models to the market for the next three to four years. Aerospace is picking up again in step with increased economic growth in the advanced economies. Aerospace orders are now being fulfilled and production lines are gearing up at a faster pace than in 2015.
Interestingly, the average dollar value per unit increased dramatically in January to its highest level since January 2015, an indicator that manufacturers are buying more sophisticated manufacturing technology to ramp up productivity rather than to increase capacity.
Looking to the future
At The MFG Meeting, forecasters suggested that the overall market for manufacturing technology will remain weak into the spring and summer months, but will turn around by September, just when IMTS – The International Manufacturing Technology Show 2016 opens.
The end of 2016 should finish strong. One piece of evidence is the unexpected March quotation activity for April through June deliveries, which is much better than expected for these months.
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