Automation Grows in U.S. Manufacturing
Fewer capital equipment unit sales and higher average unit prices indicate shops are investing in automation to improve productivity and lower costs.
Posted: January 14, 2016
The latest U.S. Manufacturing Technology Orders report shows that order value grew by 2.2 per cent for November 2015, but unit volume dropped by 16.31 per cent according to the Association for Manufacturing Technology (AMT; McLean, VA). This type of data – fewer unit sales and higher average unit prices – indicates that manufacturers are investing in automation equipment in order to improve productivity and lower their costs.
“A significant portion of global manufacturing is experiencing slower growth, especially China, and we continue to struggle with the impacts of a stronger dollar,” said Douglas K. Woods, the president of AMT. “Investing in productivity and automation technologies is one way that manufacturers look to stay competitive in a softer market, especially as pricing moderates for finished manufacture goods.”
The industries that made the most capital equipment investment included appliances and HVAC, both a direct impact of the growth in housing starts seen through 2015, and automotive, an industry that had a record-setting sales year. Additionally, computer and electronics manufacturers invested in new technology as growing demand for cloud computing services leads to data center expansion.
Automotive sales saw a record-setting year in 2015, but increasing interest rates could put some curbs on spending for new vehicles in 2016. Congress also poised manufacturing for success in 2016 on two fronts, by passing a two-year budget deal that ends sequestration and greatly reduces the risk of a government shutdown, and by restoring important tax incentives for capital equipment purchases that expired at the end of 2014.
“In addition to the benefits that come from these tax incentives, specifically 50 per cent bonus depreciation and permanent Section 179 expensing, we are hopeful that this will accelerate the replacement cycle for equipment that we are expecting in 2017 and 2018,” said Woods. “The prolonged decline in orders we saw through 2015 is anticipated to give way to an upturn at the end of 2016.”
November 2015 manufacturing technology orders totaled $329.76 million, which included orders for 1,795 units at an average value of $329,758 per unit. The total order value represented a 13.8 per cent decline compared to November 2014. Year to date, orders for 2015 totaled $3,777.98 million and a drop of 17.2 per cent compared to the $4,561.40 total at the same point in 2014. This data is a reliable leading economic indicator as manufacturing industries invest in capital metalworking equipment to increase capacity and improve productivity.
In the video below, Pat McGibbon, vice president of strategic analytics at AMT, comments on USMTO numbers and the U.S.manufacturing technology market:
Comparison charts and graphs are available here.
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