Industry > Business & Financial Indexes
Machining Activity Stable, Financial Strength Lower
"The usage of machine tools was unchanged but the delinquency rate on machine tool leases rose in October. The delinquency rate on machine tool leases is still about one-sixth of the delinquency rate on home mortgages. (Fig. 1). Both indexes were quite strong compared to the October PMI Index of 38.9 and the turmoil in housing, finance and the stock market. So far, the impact on machining is much less than on most other segments of the economy. In time, we may see more softening due to the worldwide credit problem and the recent strength of the U. S. dollar" commented Harry Moser, Chairman of GF AgieCharmilles.
| Type of Debt |
30 Day Delinquency Rate |
| Machine Tool Leases |
≈1% |
| Home Mortgages |
7.59% |
| Fig. 1 |
|
The Agie Charmilles Machining Business Activity Index, generated exclusively by Agie Charmilles, was unchanged at 59 in October. The Index is created by surveying machine tool users concerning their current business level versus three months earlier (July 2008). Any reading above 50 indicates that business activity has improved. Activity was strongest in the Midwest Region and in Captive Production companies. The Index was inaugurated in October 2004 and is the oldest monthly index of business activity in U.S. machining industries.
Historical data is shown in Figure 2, and, along with a detailed breakdown of results by geographic region and application/sector, is at http://us.gfac.com/newsroom/businessindex/index.cfm
The Agie Charmilles/USBEF Machining Industry Financial Strength Index, generated by Agie Charmilles based on data provided by USBEF, weakened to 323 in October 2008, from 370 in September 2008 and from 500 in October 2007, but was still far above January 2002’s 55, the worst reading on record. The index has been down for the last 3 months and from a peak in mid-2007, approximately when the stock market peaked. Any reading above 100 indicates that US Bancorp Equipment Finance’s(USBEF’s) machine tool lease payment delinquencies (a good measure of machine tool users’ liquidity and consistent profitability) are at a rate below the average rate of 1990 to 1999. In October the 30 day delinquency rate on machine tool leases remained much lower than the credit card or the home mortgage delinquency rate (7.59% in September 2008 per the Mortgage Bankers Association). Even the home foreclosure rate of 2.75% was about 2 times the machine delinquency rate. As profitability rises, liquidity rises, delinquencies fall and the Index rises. Historical data is shown in Figure 3 and is available at the Agie Charmilles URL mentioned above.
The approximately 126,000 U.S. companies that use machine tools have about 2 million machine tools and 750,000 to 1,000,000 directly related employees (toolmakers, machinists, operators, programmers, etc.). Almost all mid-size to large manufacturing companies use, and periodically purchase, or lease, machine tools. Thus, these indices give timely insight into the condition of U.S. manufacturing. The Machining Business Activity Index is a coincident indicator of this key manufacturing sector. The Financial Strength Index lags business activity and leads capital investment.
Business Machining Index by Geographic Region
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Survey responses are sorted geographically, using the same regional breakdown as does the USMTC (US Machine Tool Consumption) survey which is provided by AMT and AMTDA. |
Business Machining Index by Business Category
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Survey responses are also sorted by the primary Business Category of the respondent, defined by the kind of workpiece that is machined. |
About Agie Charmilles
Agie Charmilles, a Swiss company, is the North American leading supplier of wire EDM, CNC, diesinking and manual EDM systems and high speed/performance and 5-axis CNC milling machines. For more information on the company's products and services, contact Gisbert Ledvon, Agie Charmilles, 560 Bond St., Lincolnshire, IL 60069-4224, Tel: 1-800-CTC-1EDM. Gisbert.Ledvon@us.gfac.com, Fax: 847-913-5340, or visit http://www.gfac.com/us.
About US Bancorp Equipment France
The Machine Tool Finance Group of US Bancorp Equipment Finance (USBEF) offers manufacturers and vendors, flexible and competitive lease financing for metal cutting, fabrication and plastics and wood manufacturing equipment. As a subsidiary of U.S. Bank, USBEF is one of the largest bank-affiliated equipment finance companies in the nation. Telephone (800) 255-8029 ext. 492.
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