u.s. economic, industry and gears outlook: what’s in store for 2012 and beyond

U.S. Economic, Industry and Gears Outlook: What’s in Store for 2012 andBeyond

Gear Expo – Cincinnati November 2, 2011

Tom Runiewicz(Principal/Economist US Industry Practice)

Copyright © 2009 IHS Global Insight. All Rights Reserved.

2

Gear bookings and the economy do not move in lock step…but

1600

2100

2600

3100

-4

0

4

8

1993 1997 2001 2005 2009

Bookings - $ Mil. GDP - % Change

Gear Bookings & The U.S. Economy

-60-30

0306090

-3036912

2000 2002 2004 2006 2008 2010

Bookings GDP %

Growth in Gear Bookings & The U.S. EconomyPercent change from a year earlier

The Economic Outlook

Slower Growth Ahead


4 4

Diminished Expectations for the US Economy

• Slow recoveries are typical in the aftermath of a financial crisis.

• The US economy is dangerously close to stall speed; consumers and businesses are extremely cautious.

• Confidence in US policy-making has hit new lows.

• Business equipment investment, exports, and consumer durables will drive the economy’s modest near-term growth.

• A recovery in housing markets will be the key to more robust economic growth in 2013-15.

• The probability of a double-dip recession is 40%.


5

Consumers are not happy

50

64

78

92

106

120

1979 1983 1987 1991 1995 1999 2003 2007 2011

Consumer Confidence Index (University of Michigan)


6

Housing continues to struggle…light vehicle sales are improving helped by incentives

0

500

1000

1500

2000

2500

1996 1998 2000 2002 2004 2006 2008 2010

Monthly 3 Month Moving Average

Housing Starts(Millons of Units)

8

12

16

20

24

1996 1998 2000 2002 2004 2006 2008 2010

Monthly 3 Month Moving Average

U.S. Light Vehicle Sales(Millions of Units - SAAR)


7

ISM Indexes Signal Slow Grow in the Economy

25

50

75

1998 2000 2002 2004 2006 2008 2010

ISM Nonmanufacturing & Manufacturing Indices(over 50 = Expansion)


8

Rail traffic slowdown confirms economic distress

1110090807060504

20151050

-5-10-15-20-25

US Railroad Ton-Miles(3 month moving average)


9

Trucking company volumes have leveled off

70

82

94

106118

130

1996 1998 2000 2002 2004 2006 2008 2010

(2000 = 100)

ATA Truck Tonnage Index(Index 2000 = 100)


10

Small businesses remain depressed

80

86

92

98

104

110

1996 1998 2000 2002 2004 2006 2008 2010

Monthly 3-Month Moving Average

Small Business Optimism Index1987 = 100


11

Corporate America is becoming more cautious about CAPEX

-40-30-20-10

0102030

1998 2000 2002 2004 2006 2008 2010

New Orders for Nondefense Capital Goods Excluding AircraftPercent change from a year earlier


12

Equipment leasing companies have soured on the economy

45

51

57

63

69

75

2009 2009 2010 2010 2011

Equipment Finance Confidence IndexIndex begins in May 2009


13 13

-8

-6

-4

-2

0

2

4

6

8

2001 2003 2005 2007 2009 2011 20133

4

5

6

7

8

9

10

11

Real GDP Growth (Left scale, annual percent change)Unemployment Rate (Right scale, percent)

Modest US Economic Growth Results in a Persistently High Unemployment Rate


14 14

(Percent)

0

2

4

6

8

10

12

1990 1993 1996 1999 2002 2005 2008 2011 2014

Federal Funds 10-Year Treasury 30-Year Mortgage Rate

Interest Rates Will Stay Low for Several Years


15 15

-25

-20

-15

-10

-5

0

5

10

2000 2002 2004 2006 2008 2010 2012 2014

All Manufacturing Excluding Information Technology

(Percent change, annual rate)

Manufacturing Production Has Decelerated


16 16

-30

-20

-10

0

10

20

1998 2000 2002 2004 2006 2008 2010 2012 2014

Equipment and Software Structures

(Year-over-year percent change, 2005 dollars)

Equipment and Software Lead the Recovery in Business Fixed Investment


17 17

0.50

0.75

1.00

1.25

1.50

1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

Major Trading Partners Other Important Trading Partners

(Real trade-weighted dollar index, 2005=1.00)

The US Dollar Will Depreciate Against Currencies of Emerging Markets


18 18

Canada19.5%

Mexico12.8%Other

Americas10.8%

Pacific Rim25.5%

Europe22.4%

All Other9.0%

(Percent of total, 2010)

China 7.2%Japan 4.7%

Destinations of US Merchandise Exports


19 19

-20

-10

0

10

20

1998 2000 2002 2004 2006 2008 2010 2012 2014

Real US Exports Real US Imports

(Year-over-year percent change, 2005 dollars)

Real Export and Import Growth Patterns Reflect the Business Cycle and Exchange Rates


20 20

0 5 10 15 20

Foods & Feeds

Industrial Materials

Consumer Goods

Autos & Parts

Aircraft

Other Capital Equipment

Computer Equipment

2005-10 2010-15

(Annual percent change, 2005 dollars)

Capital Goods Lead Growth in Real Exports


21 21

2010 2011 2012 2013

Real GDP 3.0 1.5 1.8 2.3

Consumption 2.0 2.1 1.9 1.8

Residential Investment -4.3 -2.5 5.1 17.1

Business Fixed Investment 4.4 7.8 4.3 5.7

Federal Government 4.5 -2.3 -2.9 -3.6

State & Local Government -1.8 -2.7 -2.9 -0.8

Exports 11.3 6.7 6.4 8.8

Imports 12.5 4.9 2.6 4.7

(Percent change)

US Economic Growth by Sector


22 22

2010 2011 2012 2013

Industrial Production 5.3 3.7 2.0 2.9

Payroll Employment -0.7 0.9 1.0 1.3

Light-Vehicle Sales (Millions) 11.6 12.5 13.5 15.0

Housing Starts (Millions) 0.58 0.60 0.67 0.94

Consumer Price Index 1.6 3.2 1.6 1.8

Core CPI 1.0 1.6 1.7 1.7

WTI Oil Price ($/barrel) 79 94 98 106

Federal Funds Rate (%) 0.2 0.1 0.1 0.1

10-Year Treasury Yield (%) 3.2 2.8 2.7 2.9

(Percent change unless noted)

Other Key US Indicators


23 23

Bottom Line

• With US economic growth near “stall speed”, the risk of a return to recession is high (40%).

• Consumers and businesses remain very cautious.• Pent-up demand for housing will eventually be the key to stronger

economic growth.• The Federal Reserve powers to support growth are limited.• Fiscal tightening is coming, but the big issues (entitlements and

taxes) will not be settled until after the 2012 elections.

The Outlook for Key Gear Markets

Some Opportunities, But An Overall Downshift


25 25

The Outlook for Key Gear Industries(With Market Demand Percentage From the 2007 Economic Census)

1) Industrial Machinery (27.4%)

2) Construction Equipment (22.0%)

3) Commercial Machinery (9.6%)

4) Agricultural Equipment (9.4%)

5) Shipbuilding (Including Offshore Rigs) (8.9%)

6) Railroad Equipment Manufacturing (6.1%)

7) Machine and Other Tool Manufacturing (5.8%)

8) Power Generating Equipment (5.4%)

9) Mining, Oil & Gas Field Equipment (3.7%)

10) Aerospace (1.7%)


26

Industrial Machinery

500

1400

2300

3200

4100

5000

1999 2001 2003 2005 2007 2009 2011

New Orders for Industrial Machinery(Millions of Dollars)

8000

9800

11600

13400

15200

17000

1999 2001 2003 2005 2007 2009 2011

Unfilled Orders for Industrial Machinery(Millions of Dollars)

YTD Jan-Aug = Orders +15%, Unfilled Orders +22%


27

Industrial Machinery Overview: Slower growth ahead

• New orders for industrial machinery face something of an uphill battle.

• Traditional manufacturing is slowing down as the “soft patch” in the economy proves softer and longer-lasting.

• The high-tech sector is not immune to the weakness in the economy.

• CAPEX programs among traditional manufacturers are coming under increased scrutiny.

• The semiconductor equipment spending spree is winding down.

• Exports account for 40%-50% of U.S. industrial machinery shipments.

• Export growth is likely to slow over the near-term


28 28

Much Slower Production Growth Anticipated for Industrial Machinery over the Next Few Years, But Still No Decline

-30

-20

-10

0

10

20

30

40

1998 2000 2002 2004 2006 2008 2010 2012 2014

Production of Industrial Machinery(Percent change from a year earlier)


29

Construction Machinery

1200

2100

3000

3900

4800

1999 2001 2003 2005 2007 2009 2011

New Orders for Construction Machinery(Millions of Dollars)

1000

3200

5400

7600

9800

12000

1999 2001 2003 2005 2007 2009 2011

Construction Machinery Unfilled Orders(Millions of Dollars)

YTD Jan-Aug = Orders +43.5%, Unfilled Orders +45%


30 30

2010 2011 2012 2013Total Construction -10.9 0.5 0.3 9.5

Residential -4.6 -2.7 5.0 17.4

Commercial -30.6 -5.4 0.6 7.1

Manufacturing -31.8 -14.4 5.2 14.1

Mines & Wells 16.6 25.8 -6.2 -2.4

Health Care -5.7 -4.7 5.8 4.2

Public Utilities -12.8 2.7 -7.4 -3.8

Highways & Streets -1.5 -11.8 -6.8 -1.2

Public Education -7.9 -14.2 -9.7 -3.2

(Percent change, 2005 dollars)

US Construction Growth by Sector


31

Construction Machinery: Slower growth in the near-term…faster growth as US market snaps back

• New orders for construction machinery have exhibited considerable strength.

• Recent pick up in domestic demand tied to dealer and leasing company replacement buying.

• U.S. exports of construction and related equipment have staged an impressive comeback since the recession.

• Domestic sales growth stabilizes in the near-term and then accelerates in 2013 as construction recovers

• Exports will gain additional ground but growth slows in the near-term


32

Farm Machinery

0

1000

2000

3000

4000

1999 2001 2003 2005 2007 2009 2011

Farm Machinery Shipments(Millions of Dollars)

YTD Jan-Aug = Shipments +17%


33

When farmers have money they buy equipment

30

50

70

90

110

1999 2002 2005 2008 2011 2014

U.S. Net Farm Income(Billions of dollars)

0

1500

3000

4500

6000

2008 2010 2012 2014 2016

Canadian Net Farm Income(Millions of Dollars)


34

Farm Machinery: Still going strong for now

• U.S. Farm income came in at $79 billion in 2010, an increase of 27%. Healthy demand and lofty prices push farm income to $92 billion in 2011 and $105 billion in 2012 before drifting off to $91 billion by 2016.

• U.S. farm tractor and combine sales and production will hold up in the near term...but the farm sector CAPEX cycle is maturing.

• Following a sharp falloff in 2009, U.S. exports of farm machinery rose 12% last year and have accelerated in 2011.

• Export prospects remain bright, with the Canadian and Latin American markets providing the most support.


35 35

Much Slower Production Growth Anticipated for Off-Highway Equipment over the Next Few Years

-40

-30

-20

-10

0

10

20

30

1998 2000 2002 2004 2006 2008 2010 2012 2014

Ag Equipment Construction Equipment

Production of Agricultural & Construction Machinery

(Percent change from a year earlier)

Ag equipment index also includes lawn & garden equipment


36

Commercial & Service Equipment (Material Handling Equipment)

1000

1400

1800

2200

2600

3000

1999 2001 2003 2005 2007 2009 2011

New Orders for Material Handling Equipment(Millions of Dollars)

4000

5000

6000

7000

8000

9000

1999 2001 2003 2005 2007 2009 2011

Unfilled Orders for Material Handling Equipment(Millions of Dollars)



37

Material Handling Equipment: Domestic demand will be hurt by slowdown in manufacturing

• New orders for material handling equipment surged 24% last year and have gained additional ground in 2011.

• Industrial trucks have led the way but future demand for this equipment will taper off as activity and capital expenditures for manufacturers and wholesale and retail trade weaken.

• Leasing has become a big option for many users of equipment during this recovery.

• With the recovery in industrial, warehouse, retail, and office construction delayed, the second leg of the recovery in material handling equipment—more spending on big-ticket items—will also be postponed.

• The prospects for exports remain bright but growth will slow from the 20%-plus rate we have seen in 2010–11.

• Asia-Pacific and Latin America remain the most fertile markets for U.S. manufacturers, while European sales will continue to struggle.


38 38

Much Slower Production Growth is Expected

-20

-10

0

10

20

1998 2000 2002 2004 2006 2008 2010 2012 2014

Production of Commercial & Service Machinery(Percent change from a year earlier)


39

Metalworking Machinery

1200

1500

1800

2100

2400

2700

3000

1999 2001 2003 2005 2007 2009 2011

New Orders for Metalworking Machinery(Millions of Dollars)

01000200030004000500060007000

1999 2001 2003 2005 2007 2009 2011

Metalworking Machinery Unfilled Orders(Millions of Dollars)



40

Slower growth in metalworking industry activity will be reflected in equipment demand

80000110000140000170000200000

14001800220026003000

1999 2001 2003 2005 2007 2009 2011

Metalworking Industry Orders (Left)Metalworking Machinery Orders (Right)

Metalworking Industry Orders & Metalworking Machinery Orders

(Millions of Dollars)


41

Metalworking Machinery: Slower growth ahead

• The rebound in metalworking industry activity and pent-up demand has allowed CAPEX programs to proceed to the benefit of U.S. metalworking machinery manufacturers.

• Metalworking industry activity and CAPEX in the rest-of-the world—and in developing economies in particular—has also strengthened.

• The "soft patch" in the economy is proving softer and longer-lasting, which is not good news for the metalworking industries.

• Consumers and businesses are becoming more cautious with their financial resources. At the same time, the prospects for exports have been toned down.

• Motor vehicle industry capital spending is expected to provide support, as will the Boeing and Airbus ramp-up of production.


42 42

Much Slower Growth is Expected for Metalworking Machinery Output Over the Next Few Years

-30

-20

-10

0

10

20

1998 2000 2002 2004 2006 2008 2010 2012 2014

Production of Metalworking Machinery

(Percent change from a year earlier)


43

Power Generation & Transmission Equipment

1500

2400

3300

4200

5100

6000

1999 2001 2003 2005 2007 2009 2011

New Orders for Power Equipment(Millions of Dollars)

5000

8000

11000

14000

17000

20000

1999 2001 2003 2005 2007 2009 2011

Unfilled Orders for Power Equipment(Millions of Dollars)

YTD Jan-Aug = Orders +19%, Unfilled Orders +33.5%


44

Generating capacity additions will come slowly

75

85

95

105

1998 2000 2002 2004 2006 2008 2010

Electric Utilities Have Adequate Generating Capacity(Percent, electric utility operating rate)


45

Capacity additions remain modest

0

10000

20000

30000

2009 2011 2013 2015

Total Gross Electric Power Generating Capacity Additions

(MW)


46

Power Equipment: Modest growth ahead

• Power equipment manufacturers posted a 10% increase in shipments last year. Business has continued to improve in 2011, with year-to-date shipments up 19% versus a year ago, while new orders are up 33.5% and unfilled orders are up 66%.

• There remains little pressure on electric utilities to aggressively boost generating capacity.

• New additions for power generating equipment were actually off 19% last year, but should be up over 8% this year and close to 4% in 2012.

• Electrical generating capacity should grow over the long-term, but the growth will come in bunches.

• The domestic commercial and industrial markets will not rebound until 2013. • U.S. exports of turbines and generators fall 1.5% last year and this year they are

on track to decline 1.0%. • The demand for power equipment in developing economies will expand further as

investment in industrial and power sectors continues. Growth in the economies of China, India, Brazil, and other developing nations is expected to taper off.


47 47

The Turbine Industry is on Track to See the Best Growth in Years, Following Two Years of Substantial Decline

-30

-20

-10

0

10

20

1998 2000 2002 2004 2006 2008 2010 2012 2014

Production of Turbines & Power Generating Equipment(Percent change from a year earlier)


48

Mining, Gas Field & Oil Field Machinery & Equipment

0

800

1600

2400

3200

4000

1999 2001 2003 2005 2007 2009 2011

New Orders for Mining, Oilfield and Gas Field Machinery(Millions of Dollars)

0

3000

6000

9000

12000

15000

1999 2001 2003 2005 2007 2009 2011

Unfilled Orders for Mining, Oil Field and Gas Field Equipment(Millions of Dollars)



49

Oil prices/demand will remain favorable for investment…Shale gas gale continues

20

40

60

80

100

120

3

4

5

7

8

9

2002 2004 2006 2008 2010 2012 2014 2016

Crude Oil WTI(Left scale, dollars/barrel)Natural Gas Henry Hub(Right scale, dollars/mmBtu)

Crude Oil and Natural Gas Prices


50

Shale gas related investment will continue

72.0

74.5

77.0

79.5

82.0

2010 2011 2012 2013 2014 2015 2016

North American Natural Gas Production Capacity

(Billions of cubic feet per day)


51

51

“Tight Oil” Plays in North America

Cardium, Viking

NiobraraMowry

Bakken, Three Forks

Utica

Marcellus

Heath

Cane CreekWasatch

Green River

MonterreyNiobrara

Granite Wash

Bone Spring/AvalonWoodfordSpraberry

Eagleford

Tuscaloosa

Barnett


52

52

Tight Oil Leads the Way for US Capacity Growth

Sources: Projection from IHS CERA, historical data from IHS, US Energy Information Administration.Note: Condensates are included in crude oil.10904-4

Sources: Projection from IHS CERA, historical data from IHS,US Energy Information Administra tion.Note: Condensates are included in crude oil.10904-4

11

MillionBarrelsper Day

2010 20200

9

2000 2005 2015

87

654

321

Yet to Find

Biofuels

Natural Gas Liquids

Tight Oil

Deepwater Crude Oil

Conventional Onshoreand Shallow Water Crude Oil

10


53

Mining and Oil & Gas Field Machinery: CAPEX projects should continue

• Expanding demand and lofty energy/commodity prices have triggered stronger CAPEX programs in the energy and mining industries.

• As long as the global economy continues to expand, energy and commodity demand will keep prices high enough to promote additional exploration, development, and production CAPEX programs.

• Our current forecast has Dated Brent averaging about $112 per barrel in 2011 and 2012 before rising to $117 in 2013.

• On the natural gas front we are seeing a lull in the action as domestic supply has been expanded dramatically in recent years as a result of shale gas projects.

• However, North American natural gas productive capacity expands 8% over the four years from 2013 to 2016.


54 54

Oil/Gas/Mining Machinery Production Is on Track to Increase over 20% in 2011. Growth Then Tapers Off.

-30

-20

-10

0

10

20

30

40

1998 2000 2002 2004 2006 2008 2010 2012 2014

Production of Oil/Gas/Mining Machinery(Percent change from a year earlier)


55

Replacement demand will drive the next freight car buying cycle

5

13

21

29

37

45

0-5 6-10 11-15 16-20 21-25 26+ Avg. Age

North American Freight Car Fleet Age ProfileAge Profile - %


56

Railroad Equipment: Another buying cycle underway

• Freight car builders have survived yet another mega downturn. Peak to trough, deliveries fell from 74,729 units in 2006 to their low in 2010, a drop of 78%.

• In the previous cycles of 1998–2002 and 1979–1983, deliveries tumbled 76% and 93%, respectively.

• New orders have strengthened considerably this year, aided by some multi-year equipment buys. The freight car backlog reached 57,308 units at mid-year, the biggest backlog since the second quarter of 2008.

• Freight car builders have enough business on the books to keep them happy into 2012.

• However, rail traffic is moderating along with the overall economy, putting the freight car recovery at risk.

• Deliveries are pegged at 47,799 units in 2012, 59,015 units in 2013, 65,790 units in 2014, 61,925 units in 2015, and 56,474 units in 2016.


57

New Orders for Nondefense Aircraft

-50000

50001000015000200002500030000

1999 2001 2003 2005 2007 2009 2011

New Orders for Nondefense Aircraft(Millions of Dollars)

0

90000

180000

270000

360000

450000

1999 2001 2003 2005 2007 2009 2011

Unfilled Orders for Nondefense Aircraft(Millions of Dollars)



58

Airbus is ahead of Boeing when it comes to orders this year…but both have huge backlogs.

0

500

1,000

1,500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

Boeing Airbus *Through August

New Aircraft Orders Improving


59

Commercial air transport production heads higher

0

50

100

150

200

2007 2008 2009 2010 2011 2012 2013 2014

Commercial Aircraft Production Set to Increase(World real production revenues, 2007=100)

Source: IHS Jane's


60

Commercial market in detail


61

Backlogs will fuel near term production increases


62

Aerospace Outlook: Commercial market takes off…defense eventually slows down

• Boeing and Airbus backlogs contain six to seven years of production at current levels.

• Significant production increases were announced late in 2010 and should stretch through 2014.

• Long-term demand will be fueled by fleet growth in developing markets…and need to replace aging and less fuel efficient aircraft in developed markets.

• Most programs will see higher production rates in 2011, with more following in subsequent years. Global production will rise near 18% in 2011.

• Some signs of life have emerged in the business jet/general aviation markets.

• Aftermarket and service business for business jet and commercial airplane has improved.

• Monies from base and supplementary defense budgets are propping up defense contractor activity…but withdrawal from Iraq and Afghanistan and budget woes will pressure military spending.


63 63

The Key Gear Markets Bottom Line

• Despite slowing substantially, manufacturing growth will outpace GDP growth in the years ahead.

• However, it will take some time for manufacturing to get back to pre-recession levels.

• The capital goods industries will continue to fuel the economic recovery in 2012 and 2013. Replacement and pent-up demand remain supportive...but Corporate America is becoming more cautious.

• For many capital goods manufacturers backlogs are currently very high and should help carry production into 2012.

• The long order pipeline for aircraft should result in double-digit growth for the industry over the next three years.

• The oil and gas sectors will continue to be a growing user of capital equipment. • Capital good exports will continue to expand but growth is expected to slow.

The US Gear Manufacturing Outlook

A Weaker Economy Will Take A Toll


65 65

Metal Prices to Flatten Out As Global Demand Growth Slows

• Global economic conditions look considerably less rosy than originally expected. Although demand from China should still increase, its growth should slow significantly.

• The United States and Europe are on the back side of a manufacturing recovery, and demand for capital equipment should increase minimally.

• Primary metal operating rates are in the mid-to-lower-70% area and are not expected to increase much over the next few years--this should keep price increases to a minimum.

• Also expect little movement in stainless steel prices over the next couple of years.


66

Expect Metal Prices to Stabilize

66

-40-30-20-10

010203040506070

2001 2003 2005 2007 2009 2011 2013 2015

Steel, Cold Finished Special Bar Grade 1018 Steel, Scrap

Ferrous Metal Prices(Percent change from a year earlier)

-40-30-20-10

010203040506070

2001 2003 2005 2007 2009 2011 2013 2015

Aluminum Titanium

Nonferrous Metal Prices(Percent change from a year earlier)


67 67

2010 2011 2012 2013

Industrial Machinery 27.4 16.3 4.7 3.4

Construction Equipment 10.6 4.4 2.3 5.4

Farm Machinery 9.2 0.0 4.4 2.9

Commercial & Service Equip 3.4 11.9 1.4 0.8

Machine & Other Tools Mfg 10.6 14.1 3.9 1.8

Turbines & Power Trans Equip -19.1 8.5 3.6 0.5

Mining, Oil & Gas Field Equip 4.6 24.5 8.4 4.8

Shipbuilding & Offshore Rigs 0.5 1.3 -4.3 -4.8

(Percent change)

Summary: Key Gear Industry Markets


68 68

2010 2011 2012 2013

Railroad Rolling Equipment -10.5 60.0 25.0 12.0

Aerospace -2.3 10.0 17.9 16.7

(Percent change)

Summary: Key Gear Industry Markets (Continued)


69 69

2010 2011F 2012F 2013FBookings Percent Change

2,970.766.9

4,157.840.0

3,793.7-8.8

3,529.7-7.0

Shipments Percent Change

2,778.724.1

3,613.630.0

3,791.54.9

3,736.8-1.4

Domestic Demand Percent Change

3,700.717.4

4,885.132.0

5,101.24.4

4,988.2-2.2

Exports Percent Change

1,269.927.6

1,551.222.2

1,720.710.9

1,813.55.4

Imports Percent Change

2,192.014.8

2,822.728.8

3,030.47.4

3064.81.1

(Million dollars)

U.S. Gear Bookings, Shipments, Demand, Exports & Imports


70

This Year is On Track to be a Record, But the Next Few Years Will be More Difficult

70

1500

2000

2500

3000

3500

4000

4500

5000

5500

1998 2000 2002 2004 2006 2008 2010 2012 2014

Mill

ion

Dol

lars

U.S. Gear Bookings & Shipments

BookingsShipmentsDemand


71

The U.S. Has Increased its International Competitiveness in Gear Production

71

0

500

1000

1500

2000

2500

3000

3500

1998 2000 2002 2004 2006 2008 2010 2012 2014

Mill

ion

Dol

lars

U.S. Gear Imports & Exports

Exports

Imports


72 72

Exports

Canada 26%

Mexico 13%

Brazil 9%

China 8%

Belgium 7%

Germany 4%

Australia 4%

(Percent Market Share)

Current U.S. Gear Export Partners


73 73

Imports

Germany 22%

China 15%

Japan 14%

Italy 12%

Canada 5%

Mexico 5%

Belgium 4%

(Percent Market Share)

Current U.S. Gear Import Partners


74 74

The Gear Markets Bottom Line

• This is an excellent year for traditional capital equipment overall as replacement and pent-up demand remain strong despite little interest in capacity expansion. This year should be a record in terms of bookings, shipments, demand and exports for gears.

• U.S. gear manufacturers are also much more globally competitive. Import’s market share of consumption has declined. Imports this year remain well below the record.

• The economy and manufacturing will be horribly slow during 2012 and also sluggish in 2013. Look for a decline in gear bookings as businesses soften their focus on CAPEX. Shipments should still be slightly positive in 2012 because unfilled orders are high.

• Export opportunities still exist for non European countries. Domestic business opportunities for material handling equipment, mining, oil & gas field equipment, railroad rolling stock, and aerospace should remain strong, but growth should be slower than this year.

• The next major upturn for the gear industry should start toward the end of 2013 going into 2014 and beyond.


75

Thank you!For more information on these slides and IHS Global Insight Industry Service, please contact your IHS Global Insight Account Manager or the following members of the Industry Practices team:

Tom Runiewicz -- [email protected]

mailto:[email protected]

u.s. economic, industry and gears outlook: what’s in store for 2012 and beyond

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