Manufacturing's order decline blunted by aerospace rebound
By Christopher Chidzik
Orders of manufacturing technology, totaled $385 million in October 2024. These orders for metalworking machinery decreased 14.5% from September 2024 and were 5.5% behind October 2023 orders, according to the U.S. Manufacturing Technology Orders (USMTO) report published by AMT – The Association For Manufacturing Technology.
Year-to-date orders reached $3.74 billion, a decline of 7.5% compared to the first 10 months of 2023.
Although orders of manufacturing technology are still on a longer-term downward trend, October 2024 orders were 3% above the average value of all Octobers. This downward trend represents a normalization of order activity after a frenzied buying cycle caused by manufacturers grappling with increasing demand and the supply bottlenecks of the COVID pandemic.
After significantly increasing purchases in September 2024, contract machine shops, the largest customer of manufacturing technology, pulled back orders in October by nearly 30%. This was due to several factors. The U.S. presidential election likely introduced enough uncertainty that businesses were hesitant to make additional investments. The Boeing machinists strike, which lasted through all of October 2024, also likely freed capacity in shops that tend to serve the aerospace sector.
Unlike contract machine shops, manufacturers of aerospace products and parts increased orders of manufacturing technology to the highest level of 2024 in October. Additionally, average order value increased to the highest level since January 2022. This indicates that, much like the UAW strike in 2023, aerospace manufacturers used the downtime to replace and expand the technology used on production lines.
In the first full month after the Federal Reserve began reducing interest rates from a peak of 5.5%, manufacturing technology orders fell below the average order value of the previous expansionary period. This is in contrast to the last experience of a soft landing in 1995, when order values remained above the average between the end of the last recession and the first rate cut for at least nine months following the initial cut.
Last week’s strong jobs report showed growth in the manufacturing sector, driven largely by producers of durable goods. A good early indicator of the path ahead will come with the Federal Reserve meeting on Dec. 18 and the next publication of their economic projections.
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