Industry > Business & Financial Indexes
Machine Shops slightly stronger in March!
"Machine shops' financial strength and business activity recovered slightly in March while staying close to the lowest level of the last 5 years. 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). Both indexes were quite strong compared to the March PMI Index of 36.3% and the problems in almost all sections of the economy. "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 inventories bottoming and the coming need for industry to start slowly ramping up orders and production" commented Harry Moser, Chairman of Agie Charmilles.
| Type of Debt |
30 Day Delinquency Rate |
| Machine Tool Leases |
> 2% |
| Home Mortgages |
7.88%
11.18% incl. in foreclosure |
| Credit Cards |
5.72% |
| Fig. 1 |
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The Agie Charmilles Machining Business Activity Index, generated exclusively by Agie Charmilles, was up slightly at 51 in March from 50 in February. The Index is created by surveying machine tool users concerning their current business level versus three months earlier (December 2008). Any reading above 50 indicates that business activity has improved. Activity was strongest in the West (55) and in EDM Job Shops (54). 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, strengthened to 179 in March 2009, from 147 in February 2009 but was down from 385 in March 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 March the 30 day delinquency rate on machine tool leases remained much lower than the 4Q08 credit card (5.72% per the Federal Reserve) or the home mortgage delinquency rate (7.88% per the Mortgage Bankers Association). Even the home foreclosure rate of 3.3%, not included in the mortgage delinquency rate, was greater than the machine delinquency rate which includes machines in repossession. 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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