Podcast: How will 2025 shape demand for manufacturing technology?

Chris Chudzik is the principal economist for the Association for Manufacturing Technology (AMT). In his current role, he is responsible for examining trends in the overall economy that affect the demand for manufacturing technology. This includes managing surveys which compile the data necessary to get a full picture of the U.S. manufacturing landscape. Chris recently spoke with Robert Brooks, editor in chief of American Machinist, about the state of manufacturing technology in 2024 and what the future holds for machine tools in 2025.

Below is an excerpt from the podcast:

AM: You and I spoke several months back at the start of spring, and I'd like to continue some points of that discussion because I think they're relevant to all of our listeners. You are chiefly responsible for investigating and reporting the activities in the manufacturing technology sector. For listeners, when we discuss manufacturing technology here, we're talking about the machine tools and all the equipment and supplies that go with it. But it has a very real impact on the larger economy of manufacturing and technology, such as aerospace and automotive and defense. So, what happens in the economy of manufacturing technology, which Chris, you follow, is very influential and impactful on the larger economy. And as we speak, the Federal Reserve Bank has now cut interest rates for the third time in 2024, and I want to take you back to the point when we discussed earlier this year about the soft landing. Did the manufacturing economy achieve the soft landing that everyone was hoping for last spring?

CC: So, I tend to be pretty optimistic on most things, so I would veer toward yes. If you look at a lot of the data for manufacturing-specific sectors, particularly industrial production, they have kind of plateaued a little bit, but they're at a very elevated level. So we're still producing a lot of manufactured goods in the United States. Consumer demand has stayed elevated for manufactured goods as well as a lot of the government investment in manufacturing capacity. Every jet has how many thousands of parts. Every helicopter has that. And even aside from those typical capital goods that you think about, our President, Doug Woods, always likes to play the six degrees of separation game where you just name a product or service and he somehow connects it back to a machine tool.

So, the technologies that our members build and sell really touch a lot of aspects of the economy, and I think the path that the Fed has taken us on has really started to accomplish both ends of their dual mandate. Inflation is still a little elevated, but it's come down significantly from where it was at before. And the labor markets are starting to soften up a little bit. If you listened to the presentation yesterday by Chair Powell, they are looking at some downside risks to the labor market. But that's the whole course that they're taking with interest rates is to prevent that bottoming out and keeping the economy expanding at the rate it is. GDP expanded at, I think, 3.1% in the third quarter. So maintaining that rate with very low relative unemployment, high levels of output, I think we are on the edge if not in that soft landing that we are all anticipating.

AM: AMT, throughout the year, has maintained that machine tool demand, manufacturing technology demand, has been fairly respectable and steady. Historical average, I think, is the phrase that is typically used. Is there some indication that you know that they're holding themselves back, that they would like to do more, but they can't do more because of interest rates or they can't do more because of labor or something like that? Can you read that in the information that you have?

CC: Yes and no. We only really have data through October right now. Within, I would predict, the next week or so, we should have data out for November, and that will really be the first two months of The Fed starting to loosen monetary policy. In addition, another big hang up was the election. No matter what side of the political spectrum you fall on, it just introduces some extra level of uncertainty that I think a lot of particularly smaller businesses were saying, “You know what? Let me just wait and see what happens before I make an investment.” Hopefully, with that November data and into December, we'll see a little bit of uptick from people saying, “You know, interest rates are down. The election's over. Let me focus on my capital investment right now.”

So, I think it will be a little bit until we tell fully, but like you did mention, orders have been coming down, but from very, very elevated levels. So, I think it's more normalizing than actually declining the last couple years. And another thing that we have seen, particularly in some of the survey data, is that the buying process has really extended in the last couple months. The time from quotation to order is extending a little bit, and I think that's kind of reflecting the new reason that people are making investments right now. In prior years, we've been hearing about capacity needs, things like that. Shops would take any machine that they could get their hands on just to get an order out to their customer. I think the focus a lot more now is on quality, precision, and really controlling a lot more aspects of production that do take a little bit longer in a buying cycle. So, I think there is a little bit of pent-up demand that you were mentioning, and hopefully we'll see it in the last few months of 2024 and into 2025.

About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.