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1 GRUNDFOS MACHINING INDUSTRY issue 4, 2012 business indicator report Update on the economic Situation and Development in Selected Sectors be think innovate

2 2 GRUNDFOS MACHINING INDUSTRY issue 4, 2012 CONTENTS Economic Expectations for Key Countries and Industry Sectors (Source: ZEW indicator, ZEW, 15 May 2012) Fig. 2, New Passenger Car Registrations in Europe (Source: ACEA, 15 June 2012) Fig. 3, Machine Tool Order Intake in Germany (Source: VDMA, June 2012) Fig. 4, Machine Tool Order Intake in Japan (Source: JMTBA, June 2012) Fig. 5, Machine Tool Order Intake in U.S.A. (Source: AMT, 11 June 2012) Fig 6, German Business Climate Industry and Trade (Source: Business Climate Indicator, Ifo Institute, 24 May 2012) Fig 7, The Grundfos Global Automotive Indicators (Source: Automotive Information Platform, MarkLines.com, June 2012) Fig 8, The Grundfos Raw Material Price Index (Source: London Metal Exchange, Steel Business Briefing, CME Group, June 2012) About Grundfos Industry Indicators 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 machining industry. Almost all the charts and graphs here are publicly available. They come from the three major machine tool associations in Germany, 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 automotive Monthly Production Output by country and manufacturer. We build the latter up from available automotive production figures. Grundfos Machining Industry segment 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 seeing 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 three languages, as well a monthly version in English only. The Grundfos Industry Indicators Copyright 2012 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 directly with the links provided. We welcome your other comments.

3 3 GRUNDFOS MACHINING INDUSTRY issue 2, 2012 Grundfos analyst: Industry Stabilising In Global Slowdown The indicators show a slowdown in May compared to last month for the current business situation as well as future expectations. The development seems to be global, although it is certainly strongest in Europe. For the machining industry, it also indicates signs of stabilisation. Frank Baake Senior Marketing Analyst 1 Economic Expectations for Key Countries and Industry Sectors The ZEW Indicator of Economic Sentiment for Germany has decreased by 12.6 points to a level of 10.8 points in May Thus, the indicator has deteriorated for the first time after five consecutive increases. As a result, expectations about the development of the German economy in the next six months are still at positive territory, but have tarnished compared to the previous survey. 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. Economic expectations for the Eurozone have deteriorated by 15.5 points in May. The respective indicator now stands at minus 2.4 points. The ZEW Indicator of Economic Sentiment is ascertained monthly. Up to 350 financial experts

4 4 GRUNDFOS MACHINING INDUSTRY issue 2, 2012 ZEW Indicator of Economic Sentiment (Germany)

5 5 GRUNDFOS MACHINING INDUSTRY issue 2, New Passenger Car Registrations in Europe The European Automobile Manufacturers Association writes: In May, demand for new passenger cars in the EU was down (-8.7%) for the eighth consecutive month. In total, 1,106,845 new cars were recorded in the region. May 2012 counted on average one working day less than May Five months into the year, new registrations amounted to 5,442,326 units, or 7.7% less than in the same period last year. In May, most markets shrank, leading to an overall 8.7% downturn. The major ones faced contractions ranging from 4.8% in Germany to 8.2% in Spain, 14.3% in Italy and 16.2% in France. Only the UK posted growth (+7.9%). For more information, see ACEA s website at acea.be. 3 Machine Tool Order Intake in Germany The German Engineering Federation (VDMA) writes: For the German machine tool industry, the order intake was in April -0.9% compared to the same month in The very high domestic demand in March fell drastically in April. The VDMA (Verband Deutscher Maschinen- und Anlagenbau - German Engineering Federation) is a network of around 3,000 engineering industry companies in Europe. For more information, please visit the VDMA s website at vdma.org.

6 6 GRUNDFOS MACHINING INDUSTRY issue 2, 2012 Machine Tool Order Intake in Japan 4 According to the Japan Machine Tool Builders Association (JMTBA), The order intake for the Japanese Machine Tool Industry in May 2012 was -2.9%, compared to May 2011 and -2.2% compared to the previous month, April For more information, please visit the JMTBA s website at jmtba.or.jp Machine Tool Order Intake in U.S.A. 5 The Association for Manufacturing Technology (AMT) writes, April U.S. manufacturing technology orders totaled $ million according to AMT. This total, as reported by companies participating in the USMTO program, was down 17.0% from March but up 2.9% when compared with the total of $ million reported for April With a year-to-date total of $1, million, 2012 is up 10.2% compared with The United States Manufacturing Technology Consumption (USMTC) report, jointly compiled by the two trade associations representing the production and distribution of manufacturing 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.

7 7 GRUNDFOS MACHINING INDUSTRY issue 2, German Business Climate Industry and Trade Ifo Business Climate Germany: The recent surge in uncertainty in the Eurozone is impacting the German economy. The business climate index in manufacturing dropped sharply in May. This is primarily due to much poorer assessments of the current business situation. As far as the six-month business outlook is concerned, positive and negative expectations roughly balance each other out. The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses of firms in manufacturing, construction, wholesaling and retailing. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterise their situation as good, satisfactorily or poor and their business expectations 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 balance value of the expectations is the difference of the percentages of the responses 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 transformed balances are all normalised to the average of the year 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.

8 8 GRUNDFOS MACHINING INDUSTRY issue 2, The Grundfos Global Automotive Indicators Data source: MarkLines Co. Ltd Data source: MarkLines Co. Ltd The year 2012 started with rising production numbers for the major car manufacturers and producing countries with peaks in February and March, which dropped in April to normal figures again.

9 9 GRUNDFOS MACHINING INDUSTRY issue 2, The Grundfos Raw Materials Price Index Raw Materials Update Source: London Metal Exchange, Steel Business Briefing, CME Group. Source: London Metal Exchange, Steel Business Briefing, CME Group. Grundfos Cost Analyst Jesper Bjerregård Juul comments on the price fluctuations of raw materials and their impact on the manufacturing industry. He writes: Growing worries about Greece (and increasingly Spain) are still hovering menacingly over the markets. Whether or not Greece keeps the euro can in each case generate its own set of dire consequences. Spain is in plenty of trouble, too. In late May, the government signaled that it was on its way to nationalizing the country s fourth-largest bank (Bankia) by agreeing to pump $24 billion of capital into the institution. However, the move failed to stabilize the Spanish equity markets, as banking stocks continued to retreat sharply. In China, factory growth eased yet again in May, while local banks reported missing their lending targets by around 18%, their first shortfall in seven years, according to Metals Bulletin. The US dollar gained strength on the news of Spain s ratings cut, also adding pressure to the metals market, according to Metals Bulletin.These factors all affect the world s commodities industries.

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