The U.S. remains the world leader in machine tools installed each year. But consumption has been down during the last two years at a time when productivity growth is needed. In terms of production, Japan and Germany are the main sources of machine tools.

Let's not lose perspective here: America still leads, by far, in buying productive new machine tools. In fact, the world's preeminent economic power consumes 19 percent of the world's output. The next closest is Germany, with an appetite for 15 percent of world shipments.

But the fact is that U.S. consumption has been slowing. It fell by 1 percent last year, and that followed an 18 percent drop from the preceding year. (See graph below.)

America's lack of growth in productive installations comes in the face of significant gains by other industrialized—and industrializing—countries. The Peoples Republic of China saw an 18 percent growth in 2000; Italy's metalworking factories installed new gear at a rate 13 percent above the previous year; and Japan started its emergence from an economic long slump with a 7 percent annual growth. South Korea made a huge rebound from its financial crisis a few years back.

America won't see a quick rebound in consumption, either. Orders, tracked by a series of monthly reports from two trade groups, ran at virtually the same pace during 2000 as in the year prior. So even if order levels were to zoom, it would take several months before any newly installed machines could be up and running.

Investment in capital goods such as machine tools is likely to become a political issue as the government tries to steer the country out of the economic slowdown that started last year. Newer machine designs are demonstrably more productive than currently installed equipment, and the Bush administration seems keen on productivity as a way of turning around the business cycle. Organizations such as AMT—The Association for Manufacturing Technology, the machine tool builders' trade group on the Beltway, say they'll push to revise tax laws so businesses can more quickly amortize, and in some cases even expense away, the cost of new equipment. Those efforts won't even begin, however, until after all the issues surrounding tax relief for individuals is cleared off the table.

The value of machine tools installed last year in 29 countries is presented in the table below. The consumption numbers come from the annual World Machine-Tool Output & Consumption Survey, an exclusive study conducted through the research department of Gardner Publications, Inc. and presented first in the publisher's biweekly newsletter for machine tool executives. The study dates back 36 years and is widely used as an objective standard of comparison around the globe.

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 in the value of its imports. So in the case of the United States, domestic machine tool builders produced $4.0 billion and exported $1.3 billion. At the same time importers brought in $4.3 billion worth, so apparent consumption for 2000 comes to $7.0 billion.

With the total production of the surveyed countries coming to $36.8-billion last year, Americans thus acquired nearly one-fifth (19 percent) of the global value shipped. That total, incidentally, is about 3 percent higher than the value those same 29 countries shipped back in 1999.

The American market continues to be highly import oriented. The $4.3 billion import figure makes the United States the world's largest importer, by far. Divided by consumption, the import figure amounts to 61 percent. So, by value, six of every ten machines Americans bought last year came from abroad.

Machines Per Person?

A different way of looking at a country's new installations is to view them compared to a country's size. In other words, some might say, "The United States may be the biggest producer, but look how big it is!"

Comparing expenditures to population, we get a per-capita figure that can help evaluate individual nations' relative rates of industrialization. By this measure, the Swiss, who spent $937 million but have a population of only 7.3 million people, have an average expenditure of $129 per person. Here are expenditures for some other industrialized countries:

Consumption is, as mentioned, a calculation based on a country's domestic output minus its exports and plus its imports. The World Machine Tool Output & Consumption Survey (WMTO&CS) gathers the statistics from trade groups and governments around the world, and what emerges is an interesting look at who makes and sells the gear. The top ten producing countries are as follows.

Figures are estimates, and the number for Taiwan is unrevised from 1999 but converted at current exchange rates. Following France among producing countries are the United Kingdom, Brazil, Canada, Belgium and Austria.

Japan has led the pack since 1982 with the exception of 1999, when Germany squeaked ahead, producing $7.8 billion to Japan's $7.5 billion.

Germany's machine tool sector is one of 15 in the consortium of Western European industries collectively known as CECIMO, which is the Brussels-based organization that runs the huge EMO machine tool show in odd-numbered years. This year's EMO opens in Hanover September 12. Other members include Italy, Switzerland, Spain, France, United Kingdom, Belgium, Austria, Czech Republic, Turkey, Sweden, Finland, The Netherlands, Denmark and Portugal. Collectively, the CECIMO bloc produces $17.5 billion in machine tools, or 47 percent of the total world output tracked in the WMTO&CS.

Top Traders

Japan and Germany not only are the world's biggest in terms of production, they're also the largest exporters. Moreover, they export a significant percentage of their output: Japan's $6.8 billion in exports (up from $5.6 billion in 1999) is equivalent to 77 percent of its home factories' total production. Germany's exports account for more than half its production.

There's an interesting twist on looking at the percentage of output that goes to the loading docks for offshore delivery. There are some mercantile countries, such as Belgium, that do a significant business in re-exporting imported machines. Belgium's exports are nearly double its domestic production. The following are the leading exporters.

America, with the most voracious appetite, also leads the world in importing machine tools. Big Time. The leading importers are the listed countries.

As mentioned, the United States imports 61 percent of its consumption. But other countries also have large import numbers compared to their consumption. France and Canada, for example, have ratios of imports to consumption of 78 percent; the United Kingdom is even higher at 99 percent. Once again, the issue of a country's position as an entrepôt, bringing in equipment only to have it shipped to other countries, comes into play.

For more details on study methodology, plus a country-by-country look at the respondents to the survey, visit www.gardnerweb.com/consump/survey.html.

About the author: Journalist Joe Jablonowski is editor of Gardner's Metalworking Insiders' Report, the biweekly newsletter whose subscribers are executives in the factory-automation business.