Tool orders climbed 23% in Jan., a sign capital investment is rising U.S., foreign demand showed increases, association reports

February 26, 1996|By BLOOMBERG BUSINESS NEWS

McLEAN, Va. -- Orders for U.S. industrial tools surged during January, the Association for Manufacturing Technology said, suggesting capital investment by businesses continues to boom.

"We are encouraged that 1996 began on a robust note," said Albert Moore, the association's president.

January's orders increased 23 percent, to $462.3 million, over December's orders.

Domestic customers increased their orders by 22.4 percent during the month, while demand from abroad advanced 26.8 percent, the trade group said.

The report also showed that machine tool orders rose a revised 16.3 percent to $375.9 million in December, originally reported as a 16.8 percent increase.

Compared with a year ago, January orders rose 22.6 percent.

Machine tool shipments had fallen 31.4 percent in December to $328.2 million.

Economists follow orders and shipments of machine tools -- used to shape and assemble metals in products ranging from motorcycles to microwaves -- to gauge industrial output, consumer demand, and business investment.

Though economic growth slowed to a 0.9 percent annual pace during the final quarter of 1995, business investment in plant and equipment has remained strong.

Purchases of computers and a rise in exports, in particular, boosted output in the fourth quarter, the Commerce Department said.

"Investment should remain strong as firms seize remarkable new technological opportunities and finance them with strong cash flows," said Everett Ehrlich, the commerce undersecretary for economic affairs.

"Investment and exports will allow job and income growth to continue and support household consumption," he said.

A surge in exports made last year the best since 1979 for machine tool manufacturers, the tool association said.

Businesses have gotten a break from Federal Reserve policy-makers, who have cut the overnight bank lending rate three times since July.

The Fed last cut the overnight bank lending rate by a quarter percentage point Jan. 31, and if economic data are weak, many analysts expect a similar cut March 26.

One sign of manufacturing weak-ness came earlier this month, when the Fed reported that industrial production fell 0.9 percent during January, as the Blizzard of '96 restrained output.

More news on the pace of production is due this week, when the National Association of Purchasing Management issues its February index of manufacturing activity.

By category, January orders for metal-cutting tools, such as drills, rose 12.2 percent from the previous month to $312.3 million, while orders for metal-forming tools, such as stamp press machines, increased 53.7 percent to $150 million.

The backlog of orders, which tracks pent-up demand for tools, rose 6.4 percent to $2.215 billion during December.

Machine tools

!In millions of dollars

Month .... .... Orders

Jan. ..... .... $462.25

Dec. ..... .... 375.90

Nov. ..... .... 323.10

Oct. ..... .... 490.90

Sept. .... .... 447.35

Aug. ..... .... 347.00

July ...... ... 412.70

June ...... ... 375.30

May ....... ... 378.55

April ..... ... 368.25

March ..... ... 577.45

Feb. ...... ... 379.55

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