The starting point for any 2003 U.S. machine tool forecast is found in identifying and quantifying likely growth scenarios for the U.S. economy. Emphasis is on U.S. durable goods manufacturing and industry trends that are likely to spur recovery in capital equipment investment.
The industry's scorecard for measuring U.S. Machine Tool Consumption (USMTC) is jointly compiled by AMT-The Association For Manufacturing Technology and the American Machine Tool Distributors' Association (AMTDA), representing the production and distribution of manufacturing technology, respectively.
Unfortunately, machine tool consumption has continued a downward spiral, plunging almost 30 percent in 2002 from the dismal performance of 2001 as can be seen in the accompanying exhibit. September numbers that should have reflected a major boost from buying activity at IMTS held early in the month were up 45 percent from the prior month, but down 32.7 percent from the year earlier September performance in a non-IMTS year.
Machine tool consumption for 2002 is likely to reach $3.7 billion, with the possibility of reaching $4.1 billion in 2003, a rebuilding year, according to Gardner Research Capital Spending Survey. That' a far cry from the $6-plus billion levels recorded in the 1997-98 timeframe when U.S. manufacturing was the number one target of every global machine tool builder.
The USMTC figures stand on their own, but it is their relationship to key economic indicators that offers the most help in finding clues to future trends in capital equipment investment.
It isn't difficult to see the downward trend in U.S. machine tool consumption that began in 1998 and picked up speed in the fourth quarter of 2000. And it's understandable why the indicators, especially capacity utilization, are so carefully watched for any hint of positive movement that would be reflected in machine tool orders.
Looking into the future of the machine tool industry is not for the faint of heart. Views of the U.S. economy fall into a number of conflicting, but not necessarily contradictory scenarios. When asked for their predictions, machine tool executive responded with the following comments:
Ralph Nappi, AMTDA president, sees growth in 2003 in the range of 8-12 percent, but it must be considered in light of the 60 percent drop we have experienced since our peak years in 1997 and 1998. "A 12 percent increase would still make 2003 our second worst year in sales in the last decade. There do not appear to be any particularly strong sectors. Many are just plodding along with slow, steady, cautious growth through the end of the year. This year will likely be a year that is backloaded for growth with most of the gains coming in the last quarter."
Gerald R. Norton, president, TM Smith International, Corp. says, there will be modest growth in the 2003-2004 timeframe for the machine tool industry perhaps in the 3-4 percent range, more or less paralleling that of the overall economy.
"We are not predicting any significant recovery in machine tool investment until 2005-2006. However, the new peaks for investment and consumption levels in those advanced years will be 15-20 percent lower than the old peaks." His advice: "Any adjustments made to compensate for lower demand will need to be a built-in component of any future business plan. Manufacturers are running off asset purchases made in the mid-1990s and those assets are sustaining most companies during these lower demand levels. There still appears to be too much worldwide capacity in most sectors of the machine tool and machine tool-related industries, and until that level is reduced by some factor, overall performance improvement by individual companies will be relatively small."
Tom Dierks, president, Thrnos Technologies doesn't believe that 2003...