Demand for high-tech machines in US wanes in the face of weaker economy, high-interest rates

Even a robotic invasion cannot beat a slowing financial system.

Companies in North America sharply lower orders for high-tech machines within the second quarter, in accordance with information compiled by the Association for Advancing Automation, an business group.

The slowdown in orders started on the finish of final 12 months, as rising rates of interest and sagging financial development curbed appetites for brand new robots, the group, also referred to as A3, mentioned.

“We wouldn’t even consider buying a robot right now,” mentioned Nancy Kleitsch, chief monetary officer of ICON Injection Molding, a maker of plastic parts in Phoenix.

Like many producers, ICON’s business shot up in the course of the Covid-19 pandemic, together with demand for its plastic tubes utilized in pandemic testing. But demand for the tubes and different elements of the corporate’s business have now slumped to ranges not seen in at the very least seven years, Kleitsch mentioned.

Inflation, development worries

Many different firms seem to share ICON’s hesitation on robots. Factories and different industrial customers, together with e-commerce warehouses and medical testing firms, ordered 7,697 robots within the second quarter, a 37% decline from a 12 months in the past. That adopted a 21% drop within the first quarter and 22% decline within the fourth quarter of final 12 months. Robot gross sales boomed via the pandemic, as producers scrambled to make use of the machines to churn out badly wanted items. Indeed, even with the slowdown that hit late final 12 months, 2022 marked a file 12 months for orders, in accordance with A3.

But robots are only one kind of apparatus firms want, and different gauges of spending have held up considerably higher within the US financial system. Orders for non-defense capital items excluding plane – carefully watched by economists to trace developments in business spending – rose 0.1% final month, in accordance with the Commerce Department, suggesting that investments in a wide selection of apparatus might proceed to develop after rebounding within the second quarter.

“It’s not that we’ve soured on automating,” Jeff Burnstein, president of A3, mentioned in an interview with Reuters. “But when people are worried about inflation and the economy, it puts a damper on everything – they hold off.”

Some industries seem to have over-invested in robots in the course of the latest growth. E-commerce firms, as an example, rushed to construct extremely automated warehouses in anticipation of continued torrid development in demand for items. It hasn’t. Another downside, mentioned Burnstein, have been firms that ordered too many robots as they feared supply-chain delays.

“They were worried they wouldn’t get what they needed, so they overbought,” he mentioned. Burnstein added that A3 expects the softness in robotic orders to proceed till the fourth quarter or early subsequent 12 months.

Widening makes use of

One issue that helped drive robotic gross sales over the previous few years was a decent labor market. The unemployment price in July – at 3.5% – was close to ranges final seen greater than 50 years in the past. But employee shortages are easing. Another gauge measuring US job openings dropped to the bottom degree in practically 2-1/2 years in July because the labor market slowed, the Labor Department mentioned on Tuesday.

Meanwhile, robots proceed to worm their means into an ever-wider number of jobs. In the previous, they have been concentrated in auto factories and their suppliers, which nonetheless make up a big share of all robotic orders. But the A3 information reveals that in recent times robots have unfold to all the pieces from building websites – the place they’re now used to do duties like laying down traces on flooring to information crews on the place to put in partitions – to hospitals and food-processing vegetation.

Aaron Anderson, director of innovation at Swinerton, a big building firm primarily based in Concord, California, mentioned his firm has began utilizing a robotic that drills holes in concrete ceilings, opening the best way for plumbing different mechanical methods to be put in by staff.

But Anderson mentioned it is troublesome to justify the price of shopping for one of many machines. Since building initiatives fluctuate in measurement and complexity, he mentioned, there are spells when the robotic is not wanted in any respect.

Swinerton’s reply: It leases the machine as an alternative, which prices far much less.