Sunday, October 29, 2006

American investment continues its slide - The World Machine Tool Output & Consumption Survey

Machine tool purchases by United States metalworking factories have been declining since 1998. The latest annual survey shows the trend continuing in 2002, with the one-time undisputed leader now in fourth place behind China, Germany and Japan.

For most of the 1990s, the United States led all other countries in annual installations of productive new machine tools.

But the capital investment slump that started a few years back continues, and in 2002 the United States consumed only $3.3 billion, down one-third from 2001. A year ago it had moved out of first place among consuming countries for the first time since 1993.

It's some consolation that the decline is widespread among the world's industrialized countries: Of the top dozen purchasers of machine tools, all but one had a lower investment in machine tools than in the year before.

The one exception in that pervasive cutback is China. Last year it actually increased its purchases by 20 percent, to the point where China is now the world's leading consumer of machine tools. It bought an estimated $5.7 billion worth of the machines in 2002, outspending Germany's $4.8 billion and Japan's $3.4 billion. (See Top Consumers table.)

The international statistics come from the 38th World Machine Tool Output & Consumption Survey (WMTO& CS), conducted annually by Gardner Publications, Inc., publisher of this magazine. The study measures output, trade and consumption from major industrialized nations.

The term "consumption" is a derived statistic. It's what economists call "apparent consumption," and it's calculated by taking a country's local production, subtracting out the value of its exports, and adding the value of its imports. So in the case of the United States, domestic builders shipped $l.9 billion and exported $0.9 billion. At the same time, importers brought in $2.3 billion, so apparent consumption for 2002 comes to $3.3 billion.

The United States isn't likely to see a quick rebound. New orders, which predate consumption deliveries by anywhere from a week to many months, continue to slip.

Orders for new machines, tracked by an unconnected series of monthly reports from the two machine tool trade groups, fared poorly again last year. The latest U.S. Machine Tool Consumption (USMTC) survey of participating member companies shows total orders written during the year 2002 at 19 percent below the previous year.

The most recent monthly figure in that series, for January of this year, is also 19 percent behind the bookings posted for January 2002. That ledAlbert W. Moore, president of AMT -- The Association for Manufacturing Technology, which conducts the orders survey, to comment about America's productive capacity. "Over half of U.S. manufacturers are working with machines made in the 1960s and '70s," he says.

"The only way they can regain international competitiveness is to allow hem to fully expense he purchase of equipment in the year that it s acquired," Mr. Moore continues. "The clock s ticking for American manufacturing; the time for action is now!"

While the monthly USMTC reports orders for future consumption within the United States, the annual Gardner Publications' WMTO&CS collects statistics on actual shipments in 28 countries around the world.

Biggest Output

In addition to calculating consumption, the World Survey also lists countries by the output of their domestic machine tool industries. Germany ranks at No. 1 with $6.7 billion in 2002 shipments, slightly ahead of Japan's $6.4 billion. Italy's machinery sector, characterized by many small firms rather than a few big ones, is third, followed by the Peoples Republic of China and then the United States. (See Top Producers table.)

The total output of the surveyed countries in 2002 came to an estimated $31.0 billion, or about 14 percent less than those same 28 participants produced in 2001. The largest bloc of producers is the CECIMO consortium of mostly Western European countries. Its 15 members shipped a total of $16.1 billion, or 52 percent of the world's output.

The survey also tracks export activities. In general, the leading producers are also the top exporters, the top five of which are Germany, Japan, Italy, Switzerland and Taiwan. The latter two export more than 80 percent of their domestic production.

China's spending spree on machine tools in 2002 puts it at the top of the list of importers, which also includes the United States, Germany, Italy and South Korea. The American market continues to be highly import oriented, even though imports dropped one third from the previous year. The $2.3 billion worth of overseas-built machine tools it brought in has the U.S. market with a 70 percent import penetration (imports as a percentage of consumption). Other highly import-oriented markets include the United Kingdom (89 percent) and Canada

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