As reported by Steve Klein Jr. of Gardner Publications, USMTC reported November machine tool sales as 1,167 units. This was 53.8% lower than November 2007. While this is no surprise to many, it underscores the impact of the capital crisis. Other reports we have heard indicate manufacturers down as much as 70% over the past few months. The lack of available funding for capital equipment compounds the issue of slowed demand. How much of a bounce this could create from pent-up demand will be seen in future months, but an accelerated recovery is not what anyone seems to predict. However, there will still be opportunity in key industries and evolution will continue to occur as industries continue to modernize and transform. Aerospace, energy and medical markets still have growth prospects for 2009 and if the U.S. government focuses spending on infrastructure, construction equipment growth could kick in this year as well. Low interest rates and decreasing energy costs should also help soften the fall.

Another chart that provides some long term perspective is the trend for overall GDP in manufacturing. Though there have been plenty of job losses and many industries that have shifted production to low wage markets, the top line trend for manufacturing growth in the USA remains strong. We are making different things that tend to be higher value and require less labor. Automated processes will continue to displace manual labor when possible, but this does not mean that there is a bleak future for good jobs in manufacturing. The jobs are just higher skill jobs, which ultimately means well paying jobs. In fact, prior to the economic down turn, the most challenging issue for many manufacturers was finding qualified labor.

For those who can weather this storm, the long view will be fine. However, the challenges of the next several months may see a shake-out of some of the weaker players in the industry, as well as some consolidation within the industry.

Mr. Klein also provides interesting statistical insight with work he does using rate of change curves as a forecasting model. This work is posted on Gardner’s website along with his summary of the Metalworking Business Index (MBI) – which at 39.2 is virtually unchanged for December when compared to the November reading of 39.6. Additional comment on both are available - links are provided below.

http://www.gardnerweb.com/forecast/tools.htm

http://www.gardnerweb.com/mbi/MBIResults.htm