issue 5, 2014 - september Economic outlook wEak for 2014machining.grundfos.com/media/95213/11345_business indicator_5_2014_uk.pdf · Economic outlook weak for 2014 Economic Expectations

GRUNDFOS MACHINING INDUSTRY

issue 5, 2014 - september

Update on the economic SitUation and development in Selected SectorS

Economic outlook wEak for 2014

business indicator report

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contentSEconomic Expectations for Key Countries and Industry Sectors(Source: ZEW indicator, ZEW, 12 August 2014)

Fig. 2, New Passenger Car Registrations in Europe (Source: ACEA, 17 July 2014)

Fig. 3, Machine Tool Order Intake in Germany(Source: VDMA, September 2014)

Fig. 4, Machine Tool Order Intake in Japan(Source: JMTBA, September 2014)

Fig. 5, Machine Tool Order Intake in U.S.A.(Source: AMT, 11 August 2014)

Fig 6, German Business Climate – Industry and Trade(Source: Business Climate Indicator, Ifo Institute, 25 August 2014)

Fig 7, The Grundfos Global Automotive Indicators(Source: Automotive Information Platform, MarkLines.com, September 2014)

Fig 8, The Grundfos Raw Material Price Index(Source: London Metal Exchange, Steel Business Briefing, CME Group, September 2014)

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This quarterly newsletter can give you a general idea of which way the wind is blowing in the machine tools industry. It is a special supplement to our subscribers of Knowledge Link, our website for the machi- ning industry.

Almost all the charts and graphs here are publicly available. They come from the three major machine tool associations – in Ger-many, Japan and the United States – as well as global surveys from market analysts.

We make the final graphs ourselves, the Grundfos Raw Materials Index and the auto-motive Monthly Production Output by coun-try and manufacturer. We build the latter up from available automotive production figures. Grundfos Machining Industry seg-ment uses automotive production statistics, because that market is such a big part of the machine tools industry.

Based on that, we try to estimate how the coming one- to three months will look.

Why do we want to share these statistics? Because we have a common interest in see-ing how the market is doing. So please: read these statistics and comments as indicators alone

We publish a full version of the Grundfos Industry Indicators quarterly in three lan-guages, as well a monthly version in English only.

The Grundfos Industry Indicators Copyright 2014 Grundfos A/S. Permission to reprint graphs, tables and data has been granted to Grundfos from the various organisations represented in the publication. If you have comments or questions on the data from those organisations, please contact them di-rectly with the links provided. We welcome your other comments.

issue 5, 2014 - september

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Grundfos analyst: Economic outlook weak for 2014

Economic Expectations for Key Countries and Industry Sectors

This year’s global economic growth is looking weaker than expected. Along with low growth rates around the world – especially in Europe and Japan - we see deteriorating future business expectations in Europe. This is likely connected to the tensions in Ukraine.

While the U.S. economy looks strong, China is stagnating. One bright spot is the Japanese machine tool industry, which has orders at levels as high as six years ago and is currently

outperforming German and U.S. manufacturers. Meanwhile, global vehicle production has started to slow down.

Frank BaakeSenior Strategy & Intelligence Analyst

the Centre for european economic research (ZeW) writes,

“the ZeW indicator of economic sentiment for Germany declined significantly in August 2014. the re-spective indicator has lost 18.5 points and now stands at 8.6 points. Decreasing for the eighth consecu-tive month, the indicator has reached its lowest level since December 2012. the current decline is the strongest since June 2012.

the ZeW indicator of economic sentiment for the eurozone also declined significantly in August. the indicator has lost 24.4 points compared to the previous month, now standing at 23.7 points.”

The ZEW Indicator of Economic Sentiment is ascertained monthly. Up to 350 financial experts take part in the survey. The indicator reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic for the expected economic development in Germany in six months. The survey also asks for the expectations for the Euro-zone, Japan, Great Britain and the U.S.A.

For more information, visit ZEW’s website at zew.de.

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ZeW indicator of economic sentiment August 2014 (Germany)

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For the German Machine Tool Industry, the order intake in July was +13.9% compared to the same month in 2013. From Janu-ary to July the order intake was +6.8% versus the same period last year.

The VDMA (Verband Deutscher Maschinen- und Anlagen-bau - German Engineering Federation) is a network of around 3,000 engineering industry companies in Europe.

For more information, please visit the VDMA’s website at vdma.org.

New Passenger Car Registrations in Europe

Machine Tool Order Intake in Germany

The European Automobile Manufacturers Association writes, “In June 2014, new passenger car registrations were up by 4.5%, pursuing an upward trend commenced ten months ago. However, new registrations represent-ed a total of 1,189,143 units, which is the second lowest level reached in a month of June since ACEA began the series in 2003 with the en-larged EU. In the first semes-ter, demand for new passen-ger car registrations totalled 6,622,996 units, or 6.5% more than in the first six months of 2013.

In June, Germany was the only major market to shrink (-1.9%). Elsewhere, growth ranged from 2.5% in France, 3.8% in Italy, 6.2% in the UK and 23.9% in Spain, leading to a 4.5% upturn in the region. From January to June, growth prevailed across

major markets, reaching 2.4% in Germany, 2.9% in France, 3.3% in Italy, 10.6% in the UK and 17.8% in Spain.”

For more information, see ACEA’s website at acea.be.

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Machine Tool Order Intake in Japan

The order intake for the Japanese Machine Tool Industry in March 2014 was +41.8% compared to March 2013 (+25.8% up from February 2014), supported by strong in-crease of export orders. In Q1 the increase was +36.1%, according to figures from the Japan Machine Tool Builders’ Association (JMTBA).

Machine Tool Order Intake in U.S.A.

The Association for Manufacturing Technology (AMT) writes, “June U.S. manufacturing technology orders totalled $405.73 million,” according to AMT – The Association for Manufactur-ing Technology. “This total, as reported by companies partici-pating in the USMTO program, was up 12.6% from May but down 2.1% when compared with the total of $414.26 million reported for June 2013. With a year-to-date total of $2,349.38 million, 2014 is down 2.7% compared with 2013.”

The United States Manufacturing Technology Consumption (USMTC) report, jointly compiled by the two trade associa-

tions representing the production and distribution of manu-facturing technology, provides regional and national U.S. consumption data of domestic and imported machine tools and related equipment.

Analysis of manufacturing technology consumption provides a reliable leading economic indicator as manufacturing industries invest in capital metalworking equipment to increase capacity and improve productivity.

For more information, visit the website at amtonline.org.

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For more information, please visit the JMTBA’s website at jmtba.or.jp

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“The Ifo Business Climate Index for industry and trade in Germany fell in August to 106.3 points from 108.0 in the previous month. The firms were again less satisfied with their current business situation. Also with regard to the further course of business, they are more sceptical than in the previous month. The German economy contin-ues to lose steam.

In manufacturing the business climate index fell to its lowest level since July 2013. The current business situation was assessed less favourably for the third time in succession. The outlook for the coming months also deterio-rated noticeably.”

The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses of firms in manufacturing, construc-tion, wholesaling and retailing. The firms are asked to give their assess-ments of the current business situa-tion and their expectations for the next six months. They can characterise their

situation as “good,” “satisfactorily” or poor” and their business expectations for the next six months as “more fa-vourable”, “unchanged” or “more unfa-vourable.” The balance value of the cur-rent business situation is the difference of the percentages of the responses “good” and “poor”; the balance value of the expectations is the difference of the percentages of the responses “more favourable” and “more unfavourable.” The business climate is a transformed mean of the balances of the business situation and the expectations. For calculating the index values, the trans-formed balances are all normalised to the average of the year 2000.

The CESifo Group, consisting of the Centre for Economic Studies (CES), the Ifo Institute for Economic Research and the CESifo GmbH (Munich Society for the Promotion of Economic Research) is a research group unique in Europe in the area of economic research. It combines the theoretically oriented

economic research of the university with the empirical work of a leading Economic research institute and places this combination in an international environment.

For more information, visit the website at cesifo-group.de.

Ifo Business Climate Germany:

German Business Climate – Industry and Trade6

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Data source: markLines Co. Ltd

Data source: markLines Co. Ltd

The Grundfos Global Automotive Indicators

The six main manufacturers produced 5% more units from January-June than in the previous year. Production level in the four main vehicle-producing countries from January to July in 2014 was 8% over previous year’s period, with the typical recurrent decrease in China from April to July.

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The Grundfos Raw Materials Price Index

Raw Materials Update

Raw materials price index, General status August 2014

Source: London Metal Exchange, Steel Business Briefing, CME Group.

July 2013 = 100

Grundfos Cost Analyst menno buikema comments on the price fluctuations of raw materials and their impact on the manufacturing industry. He writes:

Commodity markets remain stableThe prices in the commodity market have been relatively sta-ble in the past month, and the changes are remarkably small. Most of the price developments in the commodity markets are the result of general economic developments.

Aluminum prices increased by 3.6%, in the past month. The price has been increasing steadily since its low-point in Febru-ary 2014 and is now at its highest level since February 2013.

The reason for the continued increase is the growing demand from sectors like automotive, construction, and beverage cans. This increased demand is expected to cause supply shortages, resulting in further price increases. Estimates call for as much as $2,400 per tonne in 2017.

The exchange rate of the Euro declined by 1,6% this month, marking the fifth consecutive month of descent. The Euro is now at its lowest monthly average since September 2013. The reasons for the decline involve the muted economic recovery of the Eurozone due to zero growth in Q2 in the larger econo-mies in the Eurozone and the crisis in the Ukraine.

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Source: London Metal Exchange, Steel Business Briefing, CME Group.

issue 5, 2014 - september

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