American factories continue to increase equipment investment: competitors in Asia also increased their consumption of machine tools in 2005

Last year, metalworking factories in the United States consumed $5.8 billion in new machine tools. That represents a 14 percent increase over American consumption of $5.1 billion in 2004, which in turn was a whopping 30 percent improvement over the spending level in 2003.

Clearly, there has been a turnaround in the worrisome slump in American capital spending, which saw double-digit negative percentage changes in the opening years of the new millennium. In a ranking of countries by their machine tool consumption, the United States moves ahead of Germany into third place.

That's the good news. The not-so-great news is that competitive goods-producing economies--particularly those in Asia--also increased their investment in machine tools.

China, the world's largest consuming country for the last 4 years, saw a 15 percent boost in 2005. Japan, number two in the world, broadened its investment by nearly 30 percent. Among other Asian consumers, South Korea increased consumption by 20 percent. Taiwan, which had posted an unsustainable near-doubling of consumption a year ago, declined in consumption by 19 percent but nevertheless managed to hold on to the number-seven position. Suddenly booming India showed a 73 percent increase in machine tool installations compared to 2004.

The international statistics come from the 41st World Machine Tool Output & Consumption Survey, conducted annually by Gardner Publications, Inc., publisher of this magazine. The study measures output, trade and consumption from major industrialized nations.

Of the 28 countries in this year's survey, three-quarters showed an increase in consumption. The term "consumption" is a derived statistic. It's what economists call "apparent consumption," and it's calculated by taking a country's production, adding in the value of its imports, then subtracting its exports. The figure of $5.8 billion in machine tools consumed by the United States comes from taking $3.2 billion in American output, adding $3.8 billion in imports and reducing the sum by the value of American exports, $1.2 billion.

As noted, the $5.8 billion in American consumption represents a 14 percent increase over the $5.1 billion figure a year ago. (However, the figure is still well below the all-time high of $8.7 billion in 1998.)