GRUNDFOS MACHINING INDUSTRY

ISSUE 4, 2014 - AUGUST

UPDATE ON THE ECONOMIC SITUATION AND DEVELOPMENT IN SELECTED SECTORS

MACHINING STILL UP IN GLOBAL DOWNTURN

business indicator report

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CONTENTSEconomic Expectations for Key Countries and Industry Sectors(Source: ZEW indicator, ZEW, 17 June 2014)

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

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

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

Fig. 5, Machine Tool Order Intake in U.S.A.(Source: AMT, 9 June 2014)

Fig 6, German Business Climate – Industry and Trade(Source: Business Climate Indicator, Ifo Institute, 24 June 2014)

Fig 7, The Grundfos Raw Material Price Index(Source: London Metal Exchange, Steel Business Briefing, CME Group, August 2014)

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ABOUT GRUNDFOS

INDUSTRY INDICATORS

CONTENTS

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 five 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 4, 2014 - AUGUST

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Grundfos analyst: Machining still up in global downturn

Economic Expectations for Key Countries and Industry Sectors

Although the July 2014 Global PMI™ Index signals moderate growth (mainly coming from the USA, China and Japan), the global economy in general lost momentum at the end of Q2. Business expectations in the Eurozone in general continued their “cautiously optimistic” status, but fragile, economic sentiment can shift rapidly.

The machining industry is still performing much better than last year at this time, but is slowing down.

Frank BaakeSenior Strategy & Intelligence Analyst

“The ZEW Economic Expectations for Germany worsened once again in June 2014. The respective indica-tor has lost 3.3 points. Now standing at 29.8 points, the indicator has decreased for the sixth time in a row. The recent decrease, however, was notably less significant than the May decrease, when the indica-tor lost more than ten points.

Expectations for the Eurozone have increased in June. The Eurozone indicator has gained 3.2 points compared to the previous month, now standing at 58.4 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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ISSUE 4, 2014 - AUGUST

ZEW Indicator of Economic Sentiment June 2014 (Germany)

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New Passenger Car Registrations in Europe

The European Automobile Manufacturers Association writes: “In May 2014, demand for new passenger cars in the EU increased for the ninth consecutive month, with a rise of 4.5% in registrations. However, in absolute figures, the total of 1,093,448 units registered marked the sec-ond lowest result to date for a month of May since ACEA began the series in 2003 with the enlarged EU. Five months into the year, new passenger car registrations increased by 6.9%, totalling 5,431,921 units.

In May 2014, Italy was the only major market to face a downturn (-3.8%). All other significant markets contributed positively to the overall 4.5% expansion of the EU market, with growth ranging from +0.3% in France, +5.2% in Germa-

ny, +7.7% in the UK to +16.9% in Spain.From January to May, all major markets posted growth, contributing to the overall 6.9% upturn of the EU market. The increase in passenger car registra-tions in this period ranged from 3.0% in

France, 3.2% in Italy, 3.4% in Germany to 11.6% in the UK and 16.3% in Spain.”

For more information, see ACEA’s web-site at acea.be.

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Machine Tool Order Intake in Germany3

For the German Machine Tool Industry, the order intake in May was +8.4% compared to the same month in 2013.

For Jan.-May the order intake was +3.8% vs. last year period.A strong decrease in domestic orders over the last 3 months

can be observed, which however could be compensated in May by again increased export orders.

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

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Machine Tool Order Intake in Japan

The order intake for the Japanese Machine Tool Industry in May 2014 was +24.1% compared to May 2013 (-1.2% down from April 2014), supported by both domestic and export orders.

In the first 5 months the growth was +35.8%, according to figures from the Japan Machine Tool Builders’ Association (JMTBA).

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

Machine Tool Order Intake in U.S.A. 5

The Association for Manufacturing Technology (AMT) writes, “April U.S. manufacturing technology orders totalled $391.53 million according to AMT - The Association for Manufacturing Technology. This total, as reported by companies participating in the USMTO program, was down 20.4% from March but up 9.8% when compared with the total of $356.52 million report-ed for April 2013. With a year-to-date total of $1,620.83 million, 2014 is up 3.0% 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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“The Ifo Business Climate Index for industry and trade in Germany fell to 109.7 points in June from 110.4 points last month. Assessments of the current business situation remained good, but companies were less optimistic about future business developments. The German economy fears the potential impact of the crises in the Ukraine and Iraq.

In manufacturing the business climate index fell considerably. Manufacturers assessed their current business situa-tion as somewhat less favourable than in May. Expectations even fell to their lowest point for over six months.

Although the export outlook clouded over considerably, the majority of man-ufacturers remain optimistic.”

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 situ-ation and their expectations for the next six months. They can characterise their situation as “good,” “satisfactori-ly” or poor” and their business expecta-tions for the next six months as “more favourable”, “unchanged” or “more unfavourable.” The balance value of the current business situation is the difference of the percentages of the responses “good” and “poor”; the bal-ance value of the expectations is the difference of the percentages of the re-sponses “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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The Grundfos Raw Materials Price Index

Raw Materials Update

Raw materials price index, General status July 2014

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

July 2012 = 100

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

Good news in China sends copper prices up

• This month’s developments in the commodity market prices are in general affected by the ongoing crisis in Ukraine, the continued Indonesian export ban on met-als and positive news on the Chinese economic situation.

• After the rise of the crude oil price to its highest level in nine months mid-June, the prices have decreased in July

again due to the eased concerns about the Iraqi insurgence. The drop was further strengthened by the news that Libya looks ready to restart exports after a year of shutdown.

• The price of copper has been stable in the past three months, but faced a 5% increase in July mainly on positive signals from the Chinese economy. Moreover, speculations of a tighter supply were caused by reduced London Metal Exchange (LME) inventories to its lowest level since August 2008, supporting the price increase.

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

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