MT Magazine November/December 2023

FEATURE STORY

THE ECONOMICS ISSUE

28

The 2008 financial crisis was a little different because industrial production peaked in the same month the recession officially began, December 2007. The dollar value of manufacturing technology orders didn’t hit a peak until seven months later, and because IMTS boosts sales, a sustained decline only began in October 2008. Units ordered peaked in September 2008 and continued to decline thereafter. The difference in timing of the decline in industrial production and the onset of the recession may be explained by the different factors that caused each recession. In 2001, a general lack of consumer demand for manufactured goods, coupled with decreasing demand for U.S. goods abroad, led to declining business investment. In this case, the decline in industrial production was one of the causes of the recession, leading to a lag between the peak and the onset of the recession. The 2008 financial crisis, as its name implies, began primarily in the financial sector and took a little longer to affect industrial production. The reason for the lag between the decline in industrial production and orders of manufacturing technology is a little less clear but will likely be the topic of a future article in this magazine. Unlike the previous two official recessions, the dollar value of manufacturing technology orders peaked in October 2014, one month prior to industrial production reaching its peak. The trend in unit orders was similar to the previous two official recessions and peaked five months after industrial production began its decline in April 2015. In the prior two recessions, industrial production quickly turned around after hitting its lowest level, beginning to rise within a month or two of the official end of the recession. In the 2016 example, industrial production declined until March 2016 and remained stagnant at those lower levels until it finally began to increase in February 2017. This extended period of lower production resulted in an extended period of slow growth for both the number of units and the value of manufacturing technology orders. Once the industry emerged from this period of stagnant growth, 2018 saw record order levels that would only be surpassed by the recovery from the COVID-19 recession.

would imply. Industrial production has been at a plateau for the last six months and has yet to show a sustained decline. If the economy is entering a period similar to the 2001 recession, we would expect industrial production to enter a period of decline, followed in the next few months by declines in the value of manufacturing technology orders. This declining production and investment would eventually trigger a recession several month later. These patterns have yet to emerge in the data, but it is also too soon to compare the patterns to 2016 as well. While manufacturing technology orders have declined from their post-COVID highs, they remain at historically elevated levels. In 2016, orders dipped below their historical average as they had in both prior official recessions. Additionally, industrial production has yet to turn downward. Unlike the situation in 2016, 2008, or 2001, extremely tight labor conditions may insulate the consumer (and broader economy) from the effects of a recession. The rapid tightening from the Federal Reserve has likely already begun to affect capital investment and some consumer demand. Keeping watch on the industrial production data could offer insights into whether manufacturing technology orders will continue to decline and the speed at which orders could rebound. Coupling those data points with broader measures of employment could give an early warning sign that the economy has tipped into recession, even if NBER has not yet made the official determination. Which Grain Will Grow and Which Will Not The experience of 2016 shows how both economists and policymakers can inadvertently miss an important economic event when looking only at the aggregated data, even in a sector as large and important as manufacturing. When facing the prospect of industry-specific slowdowns or a rolling recession, it is important to use the data most applicable to your industry to track your performance and anticipate changing customer demand. For the manufacturing technology industry, the order data offered by USMTO provides the most timely and accurate data available to gauge your performance and keep informed about customer trends by industry, machine type, and geography. Should the present economic situation develop in a similar way to the 2016 manufacturing recession, USMTO will prove an invaluable tool to follow as the next act unfolds. If you build or sell manufacturing technologies, you are eligible to participate in USMTO and gain access to the monthly market data mentioned in this article. Additionally, if you already participate in one of the AMT benchmarking surveys and want to learn more about how we can pull insights from your data, we are only an email away.

If you have any questions about this information, please contact Chris at cchidzik@AMTonline.org.

Every Cloud Engenders Not a Storm The current level of manufacturing technology orders remains above historical averages, but since the middle of 2022, they have fallen at a faster rate than what the wider economy’s growth