Production Machining

DEC 2017

Production Machining - Your access to the precision machining industrial buyer.

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Contributed by Michael Guckes F orecasting markets under the best of circumstances is always a challenge; adding natural disasters and political climate to the list of factors impacting markets only makes the job more difficult. Fortunately, most unplanned events are temporary, allowing deep- rooted drivers of market conditions, with time, to make forecasting a more reasonable task. Looking at the data of those deep-rooted drivers through the third quarter this year, Gardner Intelligence believes that manufacturing will experience modest expansion in 2018 with U.S. machine tool orders up approximately 5 percent. e reasons for this forecast include strong, worldwide economic growth and growing corporate profits across a range of industries. In addition, machine tools play an essential role in taking technological developments from the latest in high-efficiency turbines to electric vehicles from the drawing board to the factory floor. e production ramp-up required to bring such goods to market in several of the largest industries will continue to grow machine tool purchases in 2018. As compared with the average business cycle—which experiences slightly less than six years of expansion—should the current business cycle last through 2018, it will have lasted almost nine years. Among the many factors respon- sible for this cycle include the availability of "cheap" credit because of unprecedented easing of monetary policy. is has made it possible for consumers to purchase durable goods with minimal capital investment. e result of such "cheap money" has not only increased demand for goods, but also the appreciation of assets including real-estate and financial assets, which further feed consumer sense of wealth, thereby encouraging additional spending. Employment. e two drivers of productivity are labor and capital, as all production in some form must come from the combination of these two resources working together to produce the goods and services consumed in an economy. Many years of declining birth rates and the retirement of baby boomers in the U.S. has resulted in labor force growth below one percent. In 2017, the shortage of labor became particularly acute as manufacturers identified a lack of available and skilled labor as a primary concern to their businesses. Because labor shortages of this nature cannot be easily nor quickly resolved, the impact to productivity because of a shortage of labor can only be offset by investing more capital into operations. As a result, those developed nations with limited labor will have no other option than to find technological solutions to sustain economic growth above the rate of population growth. is suggests that the successful machine tool builder of the 2020s and even 2030s will provide highly automated equipment able to do much more of the work currently performed by labor as labor becomes difficult to find and/or too expensive. Automotive. Broad measures of the automotive industry through the third quarter of 2017 reinforced the prior year's trend of declining automobile sales being offset by strong sales in light truck and SUVs. Because strong sales of trucks and SUVs in 2016 more than offset the decline in automobiles in the year, 2016 ended with 17.6 million total vehicles sold, giving the industry its record-setting seventh consecutive year of increasing total vehicle sales. Factoring out replacement demand from hurricanes in 2017, flat to slightly decreasing truck sales in the second and third quarters of this year are not able to offset the decline in automobile sales. Financial incentives and low interest rate financing have provided important tailwinds to the industry in the years since e Great Recession. Average vehicle financial incentives Manufacturing Outlook Sees Growth and Transformation Traditional Manufacturing jobs Mechanical Engineers CNC Programmer Manufacturing Employment by Selected Machine Tool Trades 28 PRODUCTION MACHINING :: DECEMBER 2017 SPECIAL REPORT

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