Boom and bust. Boom and bust. If you have been involved in metalworking and the machine tool industry long enough to have endured and persevered through several of these boom-bust cycles, then you probably have this sense that the difference between the boom and the bust has increased over a time. In other words, the peaks have seemed higher and the dips deeper with each passing cycle.
Well, this is not all in your head or your gut. This impression is real.
I have spent the last 10 years attempting to forecast the metalworking industry, particularly machine tool consumption. It didn’t take me long to understand that metalworking and machine tools are the classic example of a cyclical, boom-bust industry. Although I was armed with that knowledge and had the data to back it up, I was nonetheless surprised when I took a fresh look at the long-term global machine tool consumption data from Gardner Business Intelligence’s latest World Machine Tool Survey.
Chart 1 in the slideshow at the top of this article shows world machine tool consumption with a theoretical maximum consumption trend. Notice the gray line. It represents global consumption in U.S. dollars, adjusted for inflation. This line indicates that the increase in global consumption over time is caused by more countries becoming industrialized and not the weakening of the U.S. dollar through inflation.
From 1960 to 1970, global machine tool consumption increased in an almost perfectly straight line. To almost anyone in the metalworking industry today, an entire decade of straight-line growth is almost beyond imagination. However, the boom-bust cycle that seems normal today did not begin until 1971.
Generally, a complete cycle in machine tool consumption has taken 10 years from peak to peak. In recent years, when interest rates were lowered to nearly zero (and in some cases below zero), the cycle periods became less regular.