POSITIVE SIGNALS. business indicator report UPDATE ON THE ECONOMIC SITUATION AND DEVELOPMENT IN SELECTED SECTORS GRUNDFOS MACHINING INDUSTRY

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1 GRUNDFOS MACHINING INDUSTRY POSITIVE SIGNALS UPDATE ON THE ECONOMIC SITUATION AND DEVELOPMENT IN SELECTED SECTORS be think innovate business indicator report

2 2 GRUNDFOS MACHINING INDUSTRY CONTENTS Economic Expectations for Key Countries and Industry Sectors (Source: ZEW Indicator, ZEW, 19. May 15) New Passenger Car Registrations in Europe (Source: ACEA, 19. May 15) Machine Tool Order Intake in Germany (Source: VDMA, June 15) Fig. 4, Machine Tool Order Intake in Japan (Source: JMTBA, June 15) Fig. 5, Machine Tool Order Intake in U.S.A. (Source: AMT, 08. June 15) Fig 6, German Business Climate Industry and Trade (Source: Business Climate Indicator, Info Institute, 22. May 15) Fig 7, The Grundfos Global Automotive Indicators (Source: Marklines.com, June 15) Fig 8, The Grundfos Raw Material Price Index (Source: London Metal Exchange, Steel Business Briefing, CME Group, June 2015) 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 2015 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 Grundfos analyst: Less future optimism though spots of growth The Eurozone shows record-high new car registrations, which among other factors indicate its continuing, moderate recovery. However, short-term, economic acceleration on a global level is not yet in sight. The U.S. is still the prime driver, but investments in manufacturing equipment are getting more cautious. The strong dollar plays a part in that. Progress in Asia is slow. The Machine Tool industry in Germany and Japan stands out positively in April/May Frank Baake, Senior Strategy & Intelligence Analyst 1 Economic Expectations for Key Countries and Industry Sectors The Centre for European Economic Research (ZEW) writes, The ZEW Indicator of Economic Sentiment for Germany declines in May Decreasing by 11.4 points compared to the previous month, the index now stands at 41.9 points. "Financial market experts have adjusted their optimistic expectations downward in May due to unexpectedly poor growth figures in the first quarter of 2015 and turmoil on the stock and bond markets. However, only a small number of survey participants actually expect a deterioration of the economic situation," says ZEW President Professor Clemens Fuest. The financial market experts sentiment concerning the economic development of the Eurozone is declining as well. ZEW's Indicator of Economic Sentiment for the Eurozone has decreased by 3.6 points to a reading of 61.2 points. The ZEW Indicator of Economic Sentiment is ascertained monthly. Up to 350 financial experts 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.

4 4 GRUNDFOS MACHINING INDUSTRY ZEW Indicator of Economic Sentiment April 2015 (Germany)

5 5 GRUNDFOS MACHINING INDUSTRY 2 New Passenger Car Registrations in Europe In April 2015, demand for new passenger cars in the EU increased for the twentieth consecutive month (+6.9%), totalling 1,166,482 units and recording the best result in terms of volume for the month of April since All major markets contributed positively to the overall expansion, especially Italy (+24.2%), which posted double-digit growth, followed by Germany (+6.3%), the UK (+5.1%), Spain (+3.2%) and France (+2.3%) that also performed better than in April Four months into the year, new passenger car registrations increased by 8.2%, totalling 4,695,058 units. All major markets posted growth, contributing to the overall upturn of the EU market. Registrations in Spain (+23.9%), Italy (+16.2%), the UK (+6.4%), Germany (+6.4%) and France (+5.6%) increased over this period. For more information, see ACEA s website at acea.be. 3 Machine Tool Order Intake in Germany For the German Machine Tool Industry, the order intake in April was +18.0% compared to the same month in 2014, supported by a strong domestic demand. For the first four months of the year it was -2.1%. For more information, please visit the VDMA s website at vdma.org.

6 6 GRUNDFOS MACHINING INDUSTRY Machine Tool Order Intake in Japan 4 The order intake for the Japanese Machine Tool Industry in May 2015 was +14.0% compared to May 2014 (2.9% up from April 2015). In the 5 months of 2015 the growth was +17.4%. For more information, please visit the JMTBA s website at jmtba.or.jp Machine Tool Order Intake in U.S.A. 5 April U.S. manufacturing technology orders totalled $ million according to AMT The Association for Manufacturing Technology. This total, as reported by companies participating in the USMTO program, was down 8.1% from March s $ million and down 1.0% when compared with the total of $ million reported for April With a year-to-date total of $1, million, 2015 was down 8.5% when 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 6 German Business Climate Industry and Trade Ifo Business Climate Germany: The Ifo Business Climate Index for German trade and industry edged downwards to points in May from points last month. Companies were once again more satisfied with their current business situation, but expressed slightly less optimism about the months ahead. The German economy remains on track. In manufacturing the climate indicator fell slightly after six consecutive increases. This was due to somewhat less optimistic expectations, mainly with regard to exports. Assessments of the current business situation, by contrast, climbed to their highest level since May 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 7 The Grundfos Global Automotive Indicators Data source: MarkLines Co. Ltd The six main manufacturers produced +3.9% in March (vs. last year). For the first three months of 2015 it is +1.0%. Production in the 4 main vehicle producing countries increased slightly by 0.4% in April compared to same month last year (although -10.4% vs March) and shows 1.3% growth for the first two months of the year. Data source: MarkLines Co. Ltd

9 9 GRUNDFOS MACHINING INDUSTRY 8 The Grundfos Raw Materials Price Index Raw Materials Update Source: London Metal Exchange, Steel Business Briefing, CME Group. July 2014 = 100 Raw Materials Price Index, general status June 2015 Source: London Metal Exchange, Steel Business Briefing, CME Group. Grundfos Cost Analyst Menno Buikema comments on the price fluctuations of raw materials and their impact on the manufacturing industry. He writes: In April there was a relatively high volatility of the following commodities: Nickel, Neodymium and Molybdenum decreased significantly in price, while prices of PET, Crude Oil, Brass, Copper and Aluminum increased. Nickel decreased by 7%, bringing it to a record low of USD 12,822 per tonne, 33% below the July 2014 level. Neodymium decreased by 3.9%, which is a significant drop. The figures for the first part of May indicate a further drop of the price. Molybdenum prices decreased by 2.6%, which brings it to a record low price of USD 16,985 per tonne, which is 40% below the July 2014 level. Plastic PET prices increased by 7.8% which is the largest price increase in the last years. Crude oil increased by 6.5% to USD 59.5 per Barrel. After the price plunged since June, it seems to regain stability around the USD 60 per barrel mark. Brass (Base barra OT) and (MP58) increased by 3.8% and 3.4% which is the highest point in years for both. Both Copper and Aluminum prices increased again a bit after half a year of price decrease. The prices of Cold Rolled Coil, Plastic PA 6.6, Ferro-Chrome, and Stainless Steel stayed (virtually) the same.

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