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Manufacturing Technology Consumption Isn’t A Leading Indicator – Or Even Great News

Good news is good news. And these days, US manufacturing deserves as much as it can get.

This week, a report was released that announced manufacturing & machine tool consumption is up 105% in 2011 over 2010. The US Manufacturing Technology Consumption reports are co-produced by The Association for Manufacturing Technology (AMT) & The American Machine Tool Distributors’ Association (AMTDA).

This is an industry that’s digging itself out of the worst hole since numbers have been kept. The fact that demand for upgraded technology for deployment on the shop floor is rising is as absolute an indication of real growth as I can think of – despite how far we had slipped or how affordable manufacturing technology has become.

But the chart below shows that strong consumption numbers in the manufacturing sector aren’t leading indicators, and  are certainly not reason enough to let our guard down.

May 2011 USMTC report

(click image to enlarge)

The two green bars indicate the beginning of the bursting of the dot-com bubble in March of 2000 and the beginning of the “Great Recession” in the summer of 2007 (when the housing bubble officially popped). Notice that in both instances, manufacturing technology was tracking upward AND that upward trending continued for months afterwards.

Manufacturing consumption is a lagging indicator, because its technology often takes months to select, install, refine and move into production. It just takes longer for these purchases to leak through the funnel and influence economic indications.

No one is happier to see the machine tool and manufacturing technology markets improve. I have professional and personal dogs in this fight – dear friends and colleagues that rely on these markets for their livelihoods.

But this good news has to be tempered with the realization that it’s not necessarily a leading indicator of better times ahead.

We need jobs. We need stability. We need accountability – from our government, from our business leaders, and from ourselves. And we need a comprehensive manufacturing & industrial policy from which those things flow.

Now THAT would be some GREAT news.

AJ Sweatt
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