Industry > Business & Financial Indexes
Machine Shop Financial Strength Lowest in 31 Months.
"The Machining Business Activity Index improved but the delinquency rate on machine tool leases deteriorated in November to the highest rate since February 2006. The delinquency rate on machine tool leases is still about one-fifth of the delinquency rate on home mortgages. (Fig. 1). Both indexes were quite strong compared to the November PMI Index of 36.2 and the turmoil in automotive, housing, finance and the stock market. So far, the impact on machining is much less than on most other segments of the economy. I expect to see both indexes decline due to the worldwide credit problem and the extreme conditions in the automotive industry" 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 up at 61 in November from 59 in October. The Index is created by surveying machine tool users concerning their current business level versus three months earlier (August 2008). Any reading above 50 indicates that business activity has improved. Activity was strongest in the Central and West Regions (65) and in EDM Job Shops (69). 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.
The Agie Charmilles/USBEF Machining Industry Financial Strength Index, generated by Agie Charmilles based on data provided by USBEF, weakened to 278 in November 2008, from 323 in October 2008 and from 417 in November 2007, but was still far above January 2002's 55, the worst reading on record. The index peaked in mid-2007, approximately when the stock market peaked, has been down for the last 4 months and is the lowest since February 2006. 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 November 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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