GRUNDFOS MACHINING INDUSTRY

ISSUE 8, 2013 - NOVEMBER

UPDATE ON THE ECONOMIC SITUATION AND DEVELOPMENT IN SELECTED SECTORS

ECONOMY CONTINUES STEADY RECOVERY

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CONTENTSEconomic Expectations for Key Countries and Industry Sectors(Source: ZEW indicator, ZEW, 15 October 2013)

Fig. 2, New Passenger Car Registrations in Europe (Source: ACEA, 16 October 2013)

Fig. 3, Machine Tool Order Intake in Germany(Source: VDMA, November 2013)

Fig. 4, Machine Tool Order Intake in Japan(Source: JMTBA, November 2013)

Fig. 5, Machine Tool Order Intake in U.S.A.(Source: AMT, 14 October 2013)

Fig 6, German Business Climate – Industry and Trade(Source: Business Climate Indicator, Ifo Institute, 25 October 2013)

Fig 7, The Grundfos Global Automotive Indicators(Source: Automotive Information Platform, MarkLines.com, November 2013)

Fig 8, The Grundfos Raw Material Price Index(Source: London Metal Exchange, Steel Business Briefing, CME Group, November 2013)

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ABOUT GRUNDFOS

INDUSTRY INDICATORS

CONTENTS

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 machi- ning industry.

Almost all the charts and graphs here are publicly available. They come from the three major machine tool associations – in Ger-many, 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 auto-motive Monthly Production Output by coun-try and manufacturer. We build the latter up from available automotive production figures. Grundfos Machining Industry seg-ment 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 see-ing 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 lan-guages, as well a monthly version in English only.

The Grundfos Industry Indicators Copyright 2013 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 di-rectly with the links provided. We welcome your other comments.

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Grundfos analyst: Continued Economic Recovery

Economic Expectations for Key Countries and Industry Sectors

The Eurozone continued to see signs of economic recovery during the past two months, and manufacturing activity increased in major developed countries. Positive develop-ments in the Japanese and German machine tool industries also continue. Optimistic expectations for the automotive industry are stabilizing.

Still, the global market situation is vulnerable due to the Eurozone’s lack of growth and high sovereign debt, the struggle of emerging economies, and the risk of failing United States politics regarding the national budget. Eco-nomic growth will be modest.

Frank BaakeSenior Strategy & Intelligence Analyst

The Centre for European Economic Research (ZEW) writes,

“The ZEW Indicator of Economic Sentiment for Germany has increased by 3.2 points in October 2013. The indicator now stands at a level of 52.8 points, its highest mark since April 2010.Economic expectations for the Eurozone have marginally increased in October. The respec-tive indicator has improved by 0.5 points to 59.1 points.”

Economic expectations for the Eurozone have slightly increased in June. The respective indica-tor has improved by 3.0 points to 30.6 points.”

The ZEW Indicator of Economic Sentiment is as-certained 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 pes-simistic 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.

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ZEW Indicator of Economic Sentiment June 2013 (Germany)

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For the German Machine Tool Industry, the order intake in September was -+38.2 percent compared to the same month in 2012, according to figures from the German Engineering Federation (VDMA). This was supported strongly by the ex-port demand. For January-September the order intake was -6.2% versus the same period last year.

The VDMA (Verband Deutscher Maschinen- und Anlagen-bau - 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.

New Passenger Car Registrations in Europe

Machine Tool Order Intake in Germany

The European Automobile Manufacturers Association writes: “In September, de-mand for new cars in the EU was up 5.4%, amounting to 1,159,066 units, from the re-cord low volumes registered in September 2012 (however in 2013 it was the second low-est level for a month of Sep-tember). The month counted on average one more working day across the EU this year, compared to the last. From January to September, new car registrations declined by 3.9%, compared to the first nine months of 2012, with a total of 9,000,629 vehicles.

In September, most major markets posted growth, from +3.4% in France to +12.1% in the UK and +28.5% in Spain. Italy (-2.9%) and Germany (-1.2%) saw

the number of new car registrations decrease.

Nine months into the year, the UK was the only significant market to record an increase (+10.8%). Downturn prevailed

across other major markets, ranging from -1.6% in Spain to -6.0% in Germa-ny, -8.3% in Italy and -8.5% in France.”

For more information, see ACEA’s web-site at acea.be.

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Machine Tool Order Intake in Japan

The order intake for the Japanese Ma-chine Tool Industry in September 2013 was -6.3% compared to September 2012. There was also a +35.9% growth

for domestic orders – and growth for 3 months in a row. January to September 2013 is -14.9% below last year, according to figures from the Japan Machine Tool Builders’ Association (JMTBA).

For more information, please visit the JMTBA’s website at jmtba.or.jp

Machine Tool Order Intake in U.S.A.

The Association for Manufacturing Technology (AMT) writes, “August U.S. manufacturing technology orders totalled $371.97 million. This total, as reported by companies participating in the USMTO program, was up 4.9% from July but down 18.1% when compared with the total of $454.19 million reported for August 2012. With a year-to-date total of $3,107.16 million, 2013 is down 8.0% compared with 2012.”

The United States Manufacturing Technology Consumption (USMTC) report, jointly compiled by the two trade associa-tions representing the production and distribution of manu-

facturing technology, provides regional and national U.S. con-sumption data of domestic and imported machine tools and related equipment.

Analysis of manufacturing technology consumption pro-vides a reliable leading economic indicator as manufactur-ing industries invest in capital metalworking equipment to increase capacity and improve productivity.

For more information, visit the website at amtonline.org.

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“The Ifo Business Climate Index for industry and trade in Germany fell slightly for the first time after five in-creases. Firms assessed their business outlook slightly less optimistically than last month. Assessments of the current business situation were somewhat less positive, but remain above average. The German economy has not yet moved fully into gear.

The business climate indicator in man-ufacturing fell. Assessments of the current business situation were less positive. Although business expecta-tions fell slightly, manufacturers never-theless remain optimistic about future business developments. Capacity utili-sation remained unchanged. Export expectations rose to their highest value of the year.”

The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses of firms in manufacturing, construc-tion, wholesaling and retailing. The firms are asked to give their assess-

ments of the current business situa-tion 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 fa-vourable”, “unchanged” or “more unfa-vourable.” The balance value of the cur-rent 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 trans-formed balances are all normalised to the average of the year 2000.

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.

Ifo Business Climate Germany:

German Business Climate – Industry and Trade6

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Data source: MarkLines Co. Ltd

Data source: MarkLines Co. Ltd

The Grundfos Global Automotive Indicators

From January to August, the six main manufacturers produced 2% more units than last year. In the four main vehicle-producing countries, production levels from January to August 2013 are also 3% over last year’s period.

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The Grundfos Raw Materials Price Index

Raw Materials Update

Raw materials price index, General status November 2013

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:

US Government Shutdown Causes Uncertainty

• During October, base metals generally saw small price in-creases. Other metals, plastic and oil saw price decreases.

• The United States government shutdown and the related debt issues in the United States put pressure on prices as the market feared a reduction in demand for materials.

• Copper prices in particular were at the same time impacted by increasing supply, climbing interest rates in China and a disappointing job report from the United States.

• Reduced inventories and high demand from China helped prices and average October prices closed marginally higher than average September prices.

• Oil prices fell 3% in October due to the United States govern-ment shutdown, increased unemployment, and increasing inventories.

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Source: London Metal Exchange, Steel Business Briefing, CME Group.

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