Orders for U.S. Machine Tools Hit a Slump : Industry: Possible tax breaks in ’93 and weakness overseas are blamed for a 22% drop in business in November.
Orders for American-made machine tools slumped in November as customers canceled an unusually big number of orders while others delayed purchases in hopes of future tax breaks, an industry report said Sunday.
Orders for machine tool exports also dropped sharply because of weakness in economies overseas, the Assn. for Manufacturing Technology said.
“The decline in November was the result of unusually large cancellations and customer uncertainty over possible investment incentives in 1993,” said Albert W. Moore, association president.
The association’s monthly report covers two categories of tools, for metal cutting and metal forming. Taken together, they represent a relatively small industry, and the monthly figures on orders can fluctuate widely.
Despite the monthly swings, orders for machine tools are considered an important gauge of industrial health because they play a key role in the output of a broad range of goods.
The report followed signs released last week that the economy finally is turning around after a prolonged period of stagnation.
A survey of businesses in October and November showed that they collectively planned a 5.3% increase in 1993 investment spending after a 3.6% rise this year. It would be the best gain in investment spending in four years.
The Commerce Department said the gross domestic product grew at a seasonally and inflation-adjusted 3.4% annual rate in the third quarter, not quite so strong as an earlier estimate but still the best of George Bush’s presidency.
Machine tool orders totaled $161.3 million in November, down 22% from $206.75 million in October and down 30.1% from $230.7 million in November, 1991.
For the first 11 months of the year, orders were running 1% behind last year’s pace.
Orders from foreign buyers fell to $18.2 million in November, down 20.5% from $22.9 million in October and down more than 60% from $48.5 million in November, 1991.
Canceled orders came to $23.65 million in November, about triple October’s level of $7.95 million and well above the year-to-date average monthly level.
The surge in cancellations probably occurred because, as the year’s end approached, companies planning ahead faced tough decisions about future growth in their individual industries, said Patrick McGibbon, the association’s statistical director.
Companies in industries suffering from lagging demand and profitability, such as aerospace, accounted for much of the jump in canceled orders, analysts said. With little prospect of a turnaround next year, companies opted to preserve cash by canceling orders rather than pay for previously booked new tools.
