Demand undampened

The tsunami in Japan is still fresh in the mind – with its impact on the country's economy now revealed as having pushed it back into recession – while nearer home another volcano in Iceland has erupted. The Japanese economy contracted by 0.9% in the last quarter of 2010, with this translating to an annualised contraction of 3.7%. But this recession should be temporary, it is suggested, as reconstruction work, in particular, will boost growth in the second half of 2011. Indeed, Kathy Matsui, chief Japan strategist and co-head of Asia Economics, Commodities and Strategy research at Goldman Sachs, wrote in the Financial Times recently: "Contrary to popular opinion, we believe the disaster will accelerate – rather than delay – Japan's exit from deflation. We see reconstruction demand and exports driving gross domestic product growth to an above-trend pace of 2.5 per cent in 2012." Nearer home, Iceland's Grímsvötn volcano continues to spew ash high into the atmosphere, but it's different to Eyjafjallajoekull, we are told, because the latest ash plume is being injected much higher, while the output is heavier and so should fall more quickly. But although nature shows its power to affect economies, the recovery seems pretty well established, at least in the area of machine tool demand. In our May issue, we revealed how business was bouncing back for GF AgieCharmilles (http://bit.ly/iBilTm), with the rebound in Europe higher than expected. Tornos, too, is reporting order book growth of 80% for the first quarter of this year, compared to a year earlier (page 8). This company also highlighted strong demand from its traditional markets of Switzerland and southern Europe, surpassing expectations considerably. Europe's machine tool powerhouse, Germany, has also noted that activity, as measured by capacity utilisation, had almost returned to 2008 levels during the first quarter of the year, while order intake was 130% up year on year for January-March. "The sector has picked up very much faster and more vigorously than we had anticipated in the autumn," Dr Wilfred Schaefer, executive director of German machine tool builder organisation VDW said. And, nearer home, the Manufacturing Technologies Association's latest figures show order intake hitting above the 300 index mark (Jan 2010 = 100). So while the natural world continues to offer unwelcome surprises, at a global level prospects for investment goods suppliers, at least, look bright. Just the matter of obtaining all those ballscrews, bearings, CNC units and the like to support a fast-recovering demand. First published in Machinery, June 2011