Modern Machine Shop

DEC 2018

Modern Machine Shop is focused on all aspects of metalworking technology - Providing the new product technologies; process solutions; supplier listings; business management; networking; and event information that companies need to be competitive.

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Page 69 of 115

MMS DECEMBER 2018 68 METALWORKING MARKET INTELLIGENCE Shops Outside the Core Are Driving Machine Tool Consumption Spending by the so-called "marginal buyer" (typically a small shop that purchases machines on a discretionary basis) is the dominant factor in today's market. The 2019 Capital Spending Survey proj- ects accelerating growth for the machine tool market next year. This latest report from Gardner Intelligence, the research arm of Modern Machine Shop's publisher, Gardner Business Media, sees machine tool consumption increasing 11 percent to $7.748 billion in 2019. (See chart 1.) This follows increases of 3 and 6 percent in 2017 and 2018, respectively. In 2018, machine tool prices rose and delivery times lengthened. Given the planned spending by machine shops detailed in the report, prices are likely to climb higher and delivery times will remain lengthy. Answering the question about what is driving the accelerating growth, higher prices and longer delivery times of machine tools is complex, but a good place to start is with the old economics maxim: "Prices are set at the margin." This important concept explains supply and demand and, in this case, machine tool prices. Any market, including the machine tool market, has a core set of buyers. Typically, these buyers make purchases for strategic reasons regardless of economic conditions. Other buyers move in and out of the market based on some criteria they follow. Reasons for a marginal buyer to enter the STEVEN KLINE, JR. | CHIEF DATA OFFICER

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