Return to Profitability in 1989 Expected : Machine Tool Orders Bounce Back, Rise 33%

WASHINGTON — Orders for U.S. machine tools rebounded in August, posting a one-third increase over orders in July and continuing the industry’s strong year, the industry’s trade association said Sunday.

August orders for American-made machine tools rose 33% to $340 million from orders in July, recovering from a one-third drop in July orders, the association said.

“The rise in orders for the month of August is welcome news. . . . It is especially gratifying since August is often a slow month for our industry,” said James Gray, the group’s president.

Machine tool orders are an indication of capital investment by manufacturers of durable goods, which are items that last at least three years, such as refrigerators and cars.

In the first eight months of this year, orders for U.S. machine tools were up 87% from last year to $2.41 billion, the association said.

After two dismal years, the industry appears on its way to posting a solid year, with profitability for the machine tool manufacturers expected in 1989, said Eli Lustgarten, an analyst with Paine Webber.

U.S. machine tool manufacturers have already received more orders this year than they totaled for each of the past two years.

“The industry itself is not profitable, but the strength of orders this year should ensure that the industry will return to profitability in 1989,” said Lustgarten.

“The high level of industrial activity is beginning to translate into . . . higher machine tool orders,” Lustgarten said.

The government reported earlier this month that U.S. factories, mines and utilities were operating at 83.7%, the highest rate of production in more than eight years.

Export orders of $366.3 million through August this year were double what they were in the same period last year.

On the domestic side, orders in the first eight months were up 83% to $2.04 billion from the same period in 1987.