GRUNDFOS MACHINING INDUSTRY

ISSUE 7, 2013 - SEPTEMBER

UPDATE ON THE ECONOMIC SITUATION AND DEVELOPMENT IN SELECTED SECTORS

OPTIMISTIC FUTURE FOR KEY INDUSTRIES

business indicator report

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CONTENTSEconomic Expectations for Key Countries and Industry Sectors(Source: ZEW indicator, ZEW, 13 August 2013)

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

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

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

Fig. 5, Machine Tool Order Intake in U.S.A.(Source: AMT, 9 September 2013)

Fig 6, German Business Climate – Industry and Trade(Source: Business Climate Indicator, Ifo Institute, 27 August 2013)

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

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

ISSUE 7, 2013 - SEPTEMBER

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Grundfos analyst: Optimistic Future for Key Industries

Economic Expectations for Key Countries and Industry Sectors

August showed signs of increased activity in the global man-ufacturing sector, with China’s economy catching up again. While United States industrial activity slowed down, there is a more optimistic future in store for important Eurozone countries. Until now this has had little effect on our industries in focus, but domestic demand in the Japanese and German

machine tool industries increased continuously during the last months. The EMO Exposition this month in Hannover is also expected to stimulate orders.

Frank BaakeSenior Strategy & Intelligence Analyst

The Centre for European Economic Research (ZEW) writes,

“The ZEW Indicator of Economic Sentiment for Germany increased by 5.7 points in August 2013. The indicator now stands at the 42.0-points mark. This is the highest mark since March 2013.First signs of an end to the recession in important Eurozone countries may have contributed to the indicator’s rise.

This is also reflected by the strong increase of economic expectations for the Eurozone. Fur-thermore, the economic optimism is supported by the robust domestic demand in Germany.

In August there was a strong rise of economic expectations for the Eurozone. The respective

indicator has climbed by 11.2 points to a level of 44.0 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 August 2013 (Germany)

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For the German Machine Tool Industry, the order intake was in July -20.4% compared to the same month in 2012, but in-creased compared to June this year, supported by the domes-tic demand.

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

Note: No update available for this graph at the time of publishing.

Machine Tool Order Intake in Germany

The European Automobile Manufacturers Association writes: “In June, new passen-ger car registrations totalled 1,134,042 units, declining by 5.6% compared to the same month last year. In the first half year of 2013, 6,204,990 new cars were registered in the EU, or 6.6% less than in the first six months of 2012.

In June, the UK was the only major market to expand (+13.4%), while the Spanish slipped by 0.7% and the Ger-man (-4.7%), Italian (-5.5%) and French (-8.4%) contract-ed. Total new registrations in the EU were on the lowest level recorded since 1996.

From January to June, except for the UK which expanded by 10.0%, all other ma-

jor markets faced a downturn ranging from -4.9% in Spain to -8.1% in Germa-ny, -10.3% in Italy and -11.2% 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 August 2013 was -1.8% compared to August 2012, although +20% for domestic orders.

Jan.-August 2013 is -16.1% below last year, according to figures from the Ja-pan 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, “July U.S. manufacturing technology orders totalled $351.21 million. This total, as reported by companies participating in the USMTO program, was down 23.6% from June and down 23.6% when compared with the total of $459.44 million re-ported for July 2012. With a year-to-date total of $2,925.12 mil-lion, 2013 is down 7.2% 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 in-dustry and trade in Germany continued to rise in August. Companies are more satisfied with their current business situation. Their optimism regarding future business developments – al-though slightly cautious – also grew. The German economy moved up a gear.

The business climate indicator in man-ufacturing rose significantly to its high-est value since April 2012. Assessments of the current business situation were considerably better than last month. Business expectations also continued to brighten. “

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

GM and Ford produced less in June and the decline will probably continue in July figures. The growth of Renault-Nissan is to a large extent caused by increased production in Japan (Nissan).

Production level in the 4 countries in July was 4% abovelast year. U.S. production dropped heavily against the previous month, whereas Japan improved notably.

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The Grundfos Raw Materials Price Index

Materials Update

Raw materials price index, General status May 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:

Good news for commodity prices

• Commodity prices were primarily in-fluenced by positive news from the three major regions.

• Key economic indicators indicate that the United States’ economy is grow-ing. Figures show improved senti-ment in the manufacturing industry and increasing retail sales.

• China showed signs of an improved economy. The Purchasing Managers Index (PMI), imports, and factory pro-duction all increased in August.

• Uncertainty remains in the Middle East. Political unrest in Egypt, lost oil terminals in Libya, and an escalating civil war in Syria add to insecurity in financial markets and oil prices.

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

ISSUE 7, 2013 - SEPTEMBER

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