Weekly Industry Crib Sheet: Global NC Software Market Grew in 2011
CIMdata, Inc.
CIMdata, Inc.

Plus: Factory Output Climbs, Leading Economic Indicators Rise and Jobless Claims Edge Lower.

Industrial Production Rises in Q1

Although industrial production in the United States remained flat for the second month in March, it increased at an annual rate of 5.4 percent in the first quarter of 2012, according to the Federal Reserve last week. Manufacturing output fell 0.2 percent in March, but rose at a 10.4 percent annual rate for the first quarter as a whole, with major gains in most industries, including a nearly 40 percent surge in motor vehicles and parts production.

“Evidence of weakening business equipment demand amidst a still sluggish U.S. economy as well as a wide range of global growth concerns, most notably the recession in the Eurozone and the sharp slowdown in key emerging markets, suggests that the March report might herald the beginning of a period of more moderate growth for a U.S. manufacturing sector that has persistently surprised on the upside with regard to both output and employment gains,” Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), wrote in an analysis of the Fed report.

Mining production increased 0.2 percent from February to March, but mining output fell 5.4 percent for the quarter. Month-over-month utilities output rose grew 1.5 percent in March, but declined at an annual rate of 13.8 percent in Q1, largely due to unseasonably warm weather over the first few months of the year. At 96.6 percent of its 2007 average, total industrial production for March was 3.8 percent above the level for March 2011.

“Manufacturing has been pivotal in the recovery, but production is expected to moderate along with the overall economy during the first half of the year,” the Wall Street Journal notes. “Tuesday’s report showed some areas of strength. Production of motor vehicles and parts held up, climbing 0.6 percent in March after a 0.8 percent gain the month before. Excluding autos, production in other areas of manufacturing was flat for the second consecutive month.”

In another sign of slowing growth, the capacity utilization rate for total industry fell to 78.6 percent in March, down from 78.7 percent in February. Capacity utilization for the manufacturing sector dropped from 78 percent in February to 77.8.

Leading Economic Indicators Advance in March

The index of U.S. leading economic indicators edged up in March, marking the sixth consecutive month of growth and pointing to a more positive outlook. The Conference Board’s Leading Economic Index (LEI) for the U.S. rose 0.3 percent last month following a 0.7 percent increase in February that was the biggest gain in 11 months.

March’s 0.3 percent expansion was slightly better than expected, as the median forecast of economists surveyed by Bloomberg News called for a rise of 0.2 percent last month.

“Despite relatively weak data on jobs, home building and output in the past month or two, the indicators signal continued economic momentum,” Ken Goldstein, a Conference Board economist, said in a statement. “We expect a gradual improvement in growth past the summer months.”

The LEI is a weighted gauge of 10 indicators that are designed to signal business cycle peaks and troughs. Seven of the 10 indicators that make up the LEI advanced in March, led by interest rate spreads, building permits and stock prices. The three negative contributors in March were average weekly manufacturing hours, average consumer expectations for business conditions and the Institute for Supply Management’s measure of manufacturers’ new orders.

“The index now stands at 95.7, the highest level since June 2008,” the Associated Press notes. “Before the recession began in December 2007, it routinely topped 100.”

The Conference Board’s index of coincident indicators, a measure of current economic activity, climbed 0.2 percent for the second month straight.

Jobless Claims Inch Downward

New initial jobless claims fell in the latest week reported, although the improvement was due to an upward revision of the prior week’s total. According to the U.S. Department of Labor, seasonally adjusted unemployment claims for the week ending April 14 fell by 2,000 down to a total of 386,000. The prior week’s data was revised to show 8,000 more applications received than originally reported.

“Initial claims are considered a key measure of the strength of the job market. When they fell to four-year lows a couple months ago, it was seen as an encouraging sign that layoffs were waning and companies were hiring more workers,” CNN Money reports. “But now initial claims are back at higher levels, adding to fears that the job market’s recent gains may be fizzling.”

The four-week moving average, which provides a more accurate long-term picture of the job market, increased by 5,500 from the previous week, climbing to a 2.5-month high total of 374,750 claims. Some of the increase in jobless claims may have been due to seasonal factors.

“The weekly claims data is often hard to decipher in April because of the Easter holiday and spring break, when many school workers such as bus drivers and cafeteria workers are eligible to receive temporary benefits,” MarketWatch explains. “Yet the uptick in claims, which touched a four-year low in mid-February, is sharp enough to spark concerns about whether the labor market is losing steam again.”

Global NC Software Market Grew in 2011

The worldwide market for numerical control (NC) software and related services grew 14.4 percent in 2001, based on end-user payments, according to CIMdata, Inc., a global consulting and research firm. The estimated end-user payments jumped from $1.3 billion in 2010 to $1.5 billion in 2011.

“The market growth rate in 2011 reflects a strong overall PLM spend, continuing the recovery from the downturn in the global economy that manifested itself in dramatically higher machine tool sales into the manufacturing industry,” the consultancy says in advance of the soon-to-be-issued update to its NC Market Analysis Report. “It has been estimated that worldwide shipments of machine tools increased by 35 percent from 2010 to 2011, which is directly related to the volume of CAM software employed to drive these tools.”

CIMdata projects that in 2012 growth in manufacturing will continue and end-user payments for NC software will increase by 12.4 percent to $1.7 billion.

The NC software market has shown “modest but steady growth” since 2002, the research group reports. There has been worldwide growth in both the sales of machine tools and manufacturing output over that period, as manufacturers raised their emphasis on machine tool efficiency.

The chart below shows the size and growth of the NC software and related services market based on end-user payments. It can also be seen that approximately one-third of the end-user payments result in reseller revenues and approximately two-thirds of the revenues are payments to software vendors.

Chart credit: CIMdata, Inc.



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