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Steve Kline, Jr.

Steve Kline, Jr. has been providing financial analysis and economic forecasts for Gardner Publications, Inc. (publisher of Modern Machine Shop) since 2005. While he has a degree in civil engineering from Vanderbilt University and a MBA with an emphasis on finance from the University of Cincinnati, Steve views forecasting as more of an art than a science. Therefore, his analysis focuses on trends between different data sets to determine where the economy (and, more importantly, the metalworking industry) may be headed. The study of economics is his life’s passion, hence the T-shirts of his favorite economists. Yes…any time he wears these, his wife points out that he truly is a geek.

Posted by: Steve Kline, Jr. 13. January 2015

December 2014 Metalworking Business Index (MBI) at 52.1

 

With a reading of 52.1, the Gardner Business Index showed that the metalworking industry grew for the 12th consecutive month and the 14th time in 15 months. December’s rate of expansion was the fastest since August, and the rate of expansion accelerated slightly throughout the fourth quarter of 2014. The month-over-month rate of growth was 4.4 percent, which was faster than the previous two months. The annual rate of growth decelerated for the third month in a row.

Both new orders and production increased for the 15th month in a row. The new orders index was noticeably higher than last month and hit its highest level since August. The production index was virtually unchanged from last month. Backlogs continued to contract but at a noticeably slower rate than the last three months. Compared to the same month one year ago, backlogs increased 6.6 percent. They had contracted the previous two months. While it was still growing quickly, the annual rate of growth has decelerated for four months in a row. This indicates that capacity utilization will likely see its peak rate of growth in the first or second quarter of 2015. Employment continued to expand, but it did so at its slowest rate of 2014. The rate of contraction in exports continued to slow. Supplier deliveries continued to lengthen, increasing at their fastest rate since August.

Material prices increased at a sharply slower rate. The material price index was under 60 for the first time since December 2013 and at its lowest level since October 2012. Prices received have increased the last eight months. The rate of increase was the fastest since August. This is the strongest period of sustained price increases by metalworking facilities since the summer of 2012. Future business expectations increased slightly, reaching their highest level since May.

Plants with more than 100 employees grew at a somewhat faster rate than last month. These plants still have significantly better business conditions than smaller facilities. However, plants with 50-99 employees continued to grow at a decent rate. Shops with 20-49 employees grew for the second time in three months. And, in a positive sign for the industry, shops with fewer than 20 employees grew for the first time since January 2014 and just the second time since March 2012.

The South Central had been the fastest growing region for five months in a row, but it contracted hard in December thanks to the steep fall in oil prices. It was the only region to contract this month. The fastest growing region was the North Central – East. It was followed by the Northeast, Southeast, West, and North Central – West.

Future capital spending plans contracted 13.9 percent compared to December 2013. This was the fastest month-over-month contraction since April 2013. The annual rate of growth contracted 1.9 percent, which was the first time it contracted since October 2013.

Posted by: Steve Kline, Jr. 15. December 2014

November MBI Growth Remains Steady

With a reading of 51.3, Gardner’s Metalworking Business Index (MBI) showed that the industry grew in November for the 11th consecutive month and the 13th time in 14 months, at a rate slightly faster than October. The month-over-month rate of growth was just 2.0 percent, which was the second slowest rate of growth since August 2013, and the annual rate of growth decelerated for the second month in a row.

Both new orders and production increased for the 14th month in a row, although new orders grew at their second slowest rate since September 2013 while production grew a little faster than it has since July. Backlogs contracted at their fastest rate since December 2013, and compared to the same month one year earlier, they contracted for the second month in a row. While it was still growing quickly, the annual rate of growth has decelerated for three months in a row, indicating that capacity utilization will likely see its peak rate of growth in the first or second quarter of 2015. Employment has continued to expand since August, and the rate of contraction in exports slowed significantly in November, although the dollar continues to appreciate against other world currencies. Supplier deliveries continued to lengthen, but the rate of increase has slowed the last three months.

Material prices have increased at a slower rate since June and were at their slowest rate since December 2013. Prices received have increased the last seven months, although the increase has accelerated the last two months. This is the strongest period of sustained price increases by metalworking facilities since the summer of 2012. Future business expectations increased sharply in November and were at their highest level since May.

Future capital spending plans contracted 13.7 percent from a year earlier, the fastest month-over-month contraction since February. The annual rate of growth decelerated to 0.5 percent. 

Click here for more economics news from Gardner Business Media.

Posted by: Steve Kline, Jr. 17. November 2014

A Banner Month for Machine Tool Sales

 

According to U.S. Manufacturing Technology Orders (USMTO), machine tool sales in September were 3,452 units and $638,010,000 in real dollars. These numbers are absolutely astounding. Unit sales were the highest in the history of the USMTO program, which dates back to 1996. Further, unit sales were the highest since June 1986, which made September the single best month of unit sales in nearly 30 years. In those nearly 360 months, there have only been seven months when sales topped 3,000 units. Unit sales in September were 55.3 percent more than they were last September. That sent the annual rate of change, which had been floating around 0 percent for 2014, to 7.6 percent. Based on my forecast for the remainder of the year, unit sales should end 2014 up 5.7 percent compared to 2013.

In September my unit forecast was too low by 20.3 percent, which was by far my worst performance of any month in 2014. Year to date my forecast is too low by 3.0 percent. Based on my forecast and actual data, I think some sales were held from July and August and pushed into September because of IMTS.

Real dollar sales also were the second highest in the history of the USMTO program (March 1998 had $758 million of machine tool sales). Only three times in the history of the program have real dollar sales topped $600 million in a single month. Compared to last September, real dollar sales were up 60.1 percent. Sales in September moved the annual rate of change into positive territory for the first time since November 2012. Based on my forecast, real dollar sales will end the year up 7.0 percent.

With dollar sales increasing more than unit sales in September, the average price of a machine increased 3.1 percent compared to one year ago. That is the month-over-month increase in the average price of machine since January 2014. Annually, the average price of a machine has been contracting at a slower rate since May. This is historically a sign of an improving machine tool market in unit and dollar terms. One other interesting tidbit was the disparity in the average price of machines sold in September by region. In the Southeast, Northeast and North Central - West, the average price increased by at least 16.5 percent. However, in the West, South Central and North Central - West, the average declined by at least 5.3 percent and as much as 10.6 percent.

My four primary leading indicators for machine tool sales (money supply, durable goods capacity utilization, Gardner Business Index and durable goods production) are pointing to be a very strong year for the machine tool industry in 2015.

You can find more on machine tool sales and the leading indicators on our metalworking and monetary pages.

Posted by: Steve Kline, Jr. 10. November 2014

October 2014 MBI Shows Rate of Expansion Picking Up

With a reading of 51.2, the Gardner Business Index showed that the metalworking industry grew for the 10th consecutive month and the 12th time in 13 months. October’s rate of expansion was slightly faster than last month. The month-over-month rate of growth was just 1.0 percent, which was the slowest rate of growth since August 2013. The annual rate of growth decelerated for the first time since it began growing in March.

Both new orders and production increased for the 13th month in a row. In both cases, the rate of expansion was significantly faster than the previous month. The accelerating contraction in backlogs took a pause in October as backlogs contracted at a slightly slower rate than they did in September. Compared to the same month one year ago, backlogs contracted for the first time since August 2013. While it was still growing quickly, the annual rate of growth has decelerated for two months in a row. This indicates that capacity utilization will likely see its peak rate of growth in the second quarter of 2015. Given the trend in backlogs, it is still likely that capacity utilization will average more than 80 percent in 2015. Employment continued to expand but the rate of hiring has slowed compared to the first half of the year. The rate of contraction in exports continued to accelerate as the dollar continues to appreciate against other world currencies. Supplier deliveries continued to lengthen but the rate of increase has slowed the last two months.

Material prices have increased at a slower rate since June. Material prices were increasing at a rate similar to the first four months of the year. Prices received have increased the last six months. This is the strongest period of sustained price increases by metalworking facilities since the summer of 2012. Future business expectations took their biggest hit since December 2012 and were at their lowest level since October 2013.

Plants with more than 100 employees continued to grow but they did so at their slowest rate of 2014. Facilities with 20-99 employees saw significantly better business conditions in October. Once again they were growing at a rate similar to that of the largest facilities. Shops with fewer than 20 employees contracted for the fifth month in a row and the eighth time in 2014.

For the fourth month in a row, the South Central region was the fastest growing region by a fairly wide margin. Its index has been above 60.0 two of the last three months. The North Central - East and Northeast regions also expanded. The North Central – West, West, and Southeast regions contracted after growing for a number of months.

Future capital spending plans contracted 13.5 percent compared to last October. This was the fastest month-over-month contraction since February 2014. The annual rate of growth decelerated to 4.2 percent, which was the first time it decelerated since it began growing in April.

For more manufacturing economic news, visit Gardner's Economics News Blog.

Posted by: Steve Kline, Jr. 14. October 2014

September 2014 MBI Shows Slowed Expansion

 

Go here for more economic news from Gardner Business Media.

With a reading of 50.9, Gardner’s Metalworking Business Index showed that the industry grew in September for the ninth consecutive month and the 11th time in 12 months, although the rate of expansion was the slowest of 2014. While the index was still 5.8 percent higher than it was one year earlier, this was also the slowest rate of month-over-month growth since October 2013. The annual rate of growth in the metalworking industry continued to accelerate, however, at its fastest rate since March 2011.

Both new orders and production increased for the 12th month in a row, although in both cases, the rate of expansion was the slowest of the year. Backlogs have contracted noticeably faster since June. However, the month-over-month rate of change was still growing, and the annual rate of growth was at its fastest rate since March 2011. This indicates that capacity utilization should increase rapidly in the upcoming months. Given the trend in backlogs, it is likely that capacity utilization will average more than 80 percent in 2015. Employment expanded at its fastest rate since June, while exports remain mired in contraction. Supplier deliveries continued to lengthen in September but appeared to break the trend of increasing lengthening.

Material prices have increased at a slower rate since June, at a rate similar to the first four months of the year. Prices received have increased the previous five months, the strongest period of sustained price increases by metalworking facilities since the summer of 2012. Future business expectations improved in September, with the index reaching its highest level since June.

Future capital spending plans increased 4.3 percent compared to last September. This was the second month in a row of growth. The annual rate of growth accelerated to 6.1 percent, which was its second fastest rate since March 2013. 

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