U.S. Manufacturing Technology Consumption Bounces 26% Off Bottom

Cross posted from Real Economics with some refinements.

These numbers are impressive, and they surprised me. But remember, these are numbers that are bouncing back from somewhere deeper than the basement floor. There's a long climb back to the top still ahead of us.

On a historical note, consumption of manufacturing technology used to include solely metal-forming and metal-cutting machine tools until the late 1980s, when adding things like plastic-forming machinery made a dismal picture look a lot better (this is about a decade into the U.S. "post-industrial" insanity, and U.S. capital goods industries had already been roughly halved in size since the 1960s). You will note the amount of sales for domestic use is just over $130 million. Well, back in the early 1980s, monthly numbers of $400 million or $500 million were regularly posted. This gives you some idea of how much of the U.S. industrial base has been destroyed in less than a half century.

At the time, the National Machine Tool Builders Association changed its name to the Association for Manufacturing Technology. Since then, the AMT has apparently joined with the American Machine Tool Distributors' Association to continue compiling and releasing these monthly reports.

In the 1980s, consumption of machine tools was extremely volatile. When the manufacturing sector began to feel distress, one of the first things it did was stop purchasing new manufacturing equipment. And it was not until well into recovery that the sector began to purchase machine tools again. Typically, you would see employment gains well before you saw machine tool purchases begin to rise. We still haven't seen employment gains in manufacturing this time, which suggests this is either a blip of a bounce off the worst recession since the Great Depression (note the explanation of buyers influenced by tax considerations in the article), or that there has been a structural change in the U.S. industrial base.

I suspect that it's a combination of the two. First, the past two weeks have seen more warnings of a second dip coming, making this a double-dip recession.

Second, manufacturing technology is much more automated than it was even 20 years ago. CNC (computer-numerical-control) of machine tools moved beyond experimental in the 1960s (after having largely been funded by Defense Department programs to improve the manufacturing technology of the aerospace sector - yet another example of how the conservative theme of "free market" entrepreneurship is largely a myth), but it was not until the early 1980s that CNC machine tools came into wide use in the U.S. Since then, the bugs and kinks have been worked out, and entire lines of CNC accessories and equipment have been designed and installed, such as automated robots to store, hold, and change cutting tools.

Manufacturing Technology Consumption Up 26%
Orders were placed in December to take advantage of tax relief measures.
by Industry Week

January U.S. manufacturing technology consumption totaled $130.96 million, according to AMTDA, the American Machine Tool Distributors' Association, and AMT -- The Association For Manufacturing Technology. This total was down 40.3% from December but up 26.2% from the total of $103.77 million reported for January 2009.

"Many customers placed orders in December to take advantage of tax relief measures, pulling orders out of January 2010," said Peter Borden, AMTDA President. "The good news is that January 2010 orders are still 26% ahead of January 2009. Fortunately, there are measures moving through Congress that will expand these benefits, incentivizing manufacturers to invest in capital equipment in 2010."

Read more.



the thing is

I've seen this been taken many times out of context to say all sorts of absurd things, from "oh obviously bad trade deals work" to "offshore outsourcing isn't a problem" to "this is leading the recovery" (has slightly more credibility)...

but when you're at the bottom of the cliff and manage to pull out some.....it looks great if one is just looking at short term slope or trend lines...

uh, no so much if one looks at the natural log, compounded to reflect the overall economic growth and really bad when you look at the decline of overall manufacturing in overall GDP...

But there is a huge investment tax credit and additional write offs....and all of this is good to me!

That was part of Stimulus and good to read it's having an effect.


that's why I did this as a blog instead of an InstaPopulist, because I thought it was important to include the historical overview to get a sense how miserably paltry the numbers are, because a 23% rise is certainly impressive all on its own. If we were truly on a path toward re-industrialization, such as trying to build high-speed rail systems, or wind turbine farms and solar farms, with as much domestic content as possible, I will venture to guess that we would be seeing about $500 million to $1 billion in new manufacturing technology orders each month. It's very frustrating - and very troubling - that there is no one that considers this even a remote possibility, and no one is looking at what would be required in terms of new production equipment, to get these jobs done.



understand, the never ending "percent change" tunnel vision

I've seen more than one article/post try to claim something is completely out of the woods due to a sudden percentage change over a month or even a year....

never looking at the absolute numbers themselves or the ratio to overall economic sectors.

The one that scared the shit out of me is seeing financial, our Banksters being 63% of the economy.

That's just unreal. But yeah, good to point out one spike up does not an aggregate or absolute make!

I think our manufacturing friends plain do not have enough bribe money, in comparison esp. to the Banksters to have a policy/legislation impact in D.C....

They really make a hell of a lot of sense, not only for jobs but also the overall national interest....

So, why is it they are ignored frankly?

I think there is a huge cultural problem

which can be directly touched on by referencing Veblen's differentiation between industry and business. According to Veblen, industry creates wealth, while business accumulates and manipulates wealth. What we've done in the U.S for the past half century is churn out tons of business managers, but hardly any industrialists.

We compounded the problem by deregulating finance and giving favorable tax treatment to debt and capital gains, from which emerged the socially useless mergers and acquisitions booms, the even more harmful leveraged buy outs, and the corporate raider. Then, to top it off, we lavished praise and wealth on the manipulators of wealth, while deriding the creators of wealth.

I also think a "country club mentality" of hostility to labor set in. It obviously didn't help that Cosa Nostra was allowed to take over many of the unions after World War 2 (I think it's Michael Rupert who delves into that a bit, and asserts it was the pay off for the intelligence assistance the mob provided in the Sicilian and Italian campaigns in World War 2). But American management clearly becomes bitterly hostile to labor by the late 1960s, and by the 1980s is quite happy to sell the U.S. industrial base down the river to get cheaper labor overseas - and screw over American labor in the bargain. Jeff Faux, in his book The Global Class War, has some outrageous quotes from business managers, including why they sided with Reagan, even though Reagan refused to do anything about unfair trade practices in steel: because Reagan was cutting their taxes. 

What all this adds up to is that anyone who had the misfortune of thinking they could make a good living in manifacturing, while the rest of the U.S. tooks its acid trip down the rabbit hole of "post-industrial society," was pretty much shunned as a fool and a wierdo. The smart kids from Yale and Princeton and Harvard went to Wall Street, not to the bases of old wealth like Weyerhauser or Phelps Dodge.