Industry > Business & Financial Indexes
Machine Shops' Activity at Record Low Level
“Machine shops’ financial strength and business activity both weakened in April with business activity at the lowest level recorded since measurement started in 2004. The 30 day delinquency rate on machine tool leases is still about one-fourth of the 30 day delinquency rate on home mortgages and one-third of the 30 day delinquency rate on credit cards (Fig. 1). For comparison, in April the Federal Reserve’s Capacity Utilization Index fell to 69%, the lowest on record, and the PMI Index improved to 40.1 with new orders at 47.2. Financial strength is likely to resume its decline due to the cumulative impact of lower sales and difficult collections on machine shop balance sheets. However, there are increasing signs of companies, at the least bottoming and, in many cases, starting to replenish inventories. The general downtrend in the U.S. dollar will tend to add further strength to manufacturing,” commented Harry Moser, Chairman of GF AgieCharmilles.
| Type of Debt |
30 Day Delinquency Rate |
| Machine Tool Leases |
> 2% |
| Home Mortgages |
7.88%
11.18% incl. in foreclosure |
| Credit Cards |
6.61% |
| Fig. 1 |
|
The Agie Charmilles Machining Business Activity Index, generated exclusively by Agie Charmilles, was down at 47 in April from 51 in March. The April reading is the lowest on record. The Index is created by surveying machine tool users concerning their current business level versus three months earlier (January 2009). Any reading above 50 indicates that business activity has improved. Activity was strongest in the Central region (55). The Index was inaugurated in October 2004 and is the oldest monthly index of business activity in the U.S. machining industries.
Historical data is shown in Figure 2, and, along with a detailed breakdown of results by geographic region and application/sector.
The Agie Charmilles/USBEF Machining Industry Financial Strength Index, generated by Agie Charmilles based on data provided by USBEF, weakened to 154 in April 2009, from 179 in March 2009 and was down from 400 in April 2008, but still far above January 2002’s 55, the worst reading on record. The index peaked in mid-2007, approximately when the stock market peaked, and has been generally declining since. Any reading above 100 indicates that US Bancorp Equipment Finance’s (USBEF’s) machine tool lease payment delinquencies (a good measure of machine tool users’ liquidity and consistent profitability) are at a rate below the average rate of 1990 to 1999. In April the 30 day delinquency rate on machine tool leases remained much lower than the 1Q09 credit card (6.61% per the Federal Reserve) or the April 2009 home mortgage delinquency rate (6.5% on the highest quality prime mortgages per the Mortgage Bankers Association). As shop profitability rises, liquidity rises, delinquencies fall and the Index rises. Historical data is shown in Figure 3 and is available at the Agie Charmilles URL mentioned above.
The approximately 126,000 U.S. companies that use machine tools have about 2 million machine tools and 750,000 to 1,000,000 directly related employees (toolmakers, machinists, operators, programmers, etc.). Almost all mid-size to large manufacturing companies use, and periodically purchase, or lease, machine tools. Thus, these indices give timely insight into the condition of U.S. manufacturing. The Machining Business Activity Index is a coincident indicator of this key manufacturing sector. The Financial Strength Index lags business activity and leads capital investment.
Business Machining Index by Geographic Region
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Survey responses are sorted geographically, using the same regional breakdown as does the USMTC (US Machine Tool Consumption) survey which is provided by AMT and AMTDA. |
Business Machining Index by Business Category
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Survey responses are also sorted by the primary Business Category of the respondent, defined by the kind of workpiece that is machined. |
About Agie Charmilles
Agie Charmilles, a Swiss company, is the North American leading supplier of wire EDM, CNC, diesinking and manual EDM systems and high speed/performance and 5-axis CNC milling machines. For more information on the company's products and services, contact Gisbert Ledvon, Agie Charmilles, 560 Bond St., Lincolnshire, IL 60069-4224, Tel: 1-800-CTC-1EDM. Gisbert.Ledvon@us.gfac.com, Fax: 847-913-5340, or visit http://www.gfac.com/us.
About US Bancorp Equipment France
The Machine Tool Finance Group of US Bancorp Equipment Finance (USBEF) offers manufacturers and vendors, flexible and competitive lease financing for metal cutting, fabrication and plastics and wood manufacturing equipment. As a subsidiary of U.S. Bank, USBEF is one of the largest bank-affiliated equipment finance companies in the nation. Telephone (800) 255-8029 ext. 492.
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