Robot invasion slows in the face of weaker US economy, high interest
rates
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[August 31, 2023] By
Timothy Aeppel
(Reuters) - Even a robot invasion can't beat a slowing economy.
Companies in North America sharply cut orders for the high-tech machines
in the second quarter, according to data compiled by the Association for
Advancing Automation, an industry group.
The slowdown in orders began at the end of last year, as rising interest
rates and sagging economic growth curbed appetites for new robots, the
group, also known as A3, said.
"We wouldn't even consider buying a robot right now," said Nancy
Kleitsch, chief financial officer of ICON Injection Molding, a maker of
plastic components in Phoenix.
Like many producers, ICON's business shot up during the COVID-19
pandemic, including demand for its plastic tubes used in pandemic
testing. But demand for the tubes and other parts of the company's
business have now slumped to levels not seen in at least seven years,
Kleitsch said.
INFLATION, GROWTH WORRIES
Many other companies appear to share ICON's hesitation on robots.
Factories and other industrial users, including e-commerce warehouses
and medical testing companies, ordered 7,697 robots in the second
quarter, a 37% decline from a year ago. That followed a 21% drop in the
first quarter and 22% decline in the fourth quarter of last year.
Robot sales boomed through the pandemic, as producers scrambled to use
the machines to churn out badly needed goods. Indeed, even with the
slowdown that hit late last year, 2022 marked a record year for orders,
according to A3.
But robots are just one type of equipment companies need, and other
gauges of spending have held up somewhat better in the U.S. economy.
Orders for non-defense capital goods excluding aircraft - closely
watched by economists to track trends in business spending - rose 0.1%
last month, according to the Commerce Department, suggesting that
investments in a wide array of equipment could continue to grow after
rebounding in the second quarter.
"It's not that we've soured on automating," Jeff Burnstein, president of
A3, said in an interview with Reuters. "But when people are worried
about inflation and the economy, it puts a damper on everything - they
hold off."
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A worker uses a robot to place a Tundra
body onto its frame at Toyota's truck plant in San Antonio, Texas,
U.S. April 17, 2023. REUTERS/Jordan Vonderhaar
Some industries appear to have over-invested in robots during the
recent boom. E-commerce companies, for instance, rushed to build
highly automated warehouses in anticipation of continued torrid
growth in demand for goods. It hasn't. Another problem, said
Burnstein, were companies 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 said. Burnstein added that A3 expects the softness
in robot orders to continue until the fourth quarter or early next
year.
WIDENING USES
One factor that helped drive robot sales over the past few years was
a tight labor market. The unemployment rate in July - at 3.5% - was
near levels last seen more than 50 years ago. But worker shortages
are easing. Another gauge measuring U.S. job openings dropped to the
lowest level in nearly 2-1/2 years in July as the labor market
slowed, the Labor Department said on Tuesday.
Meanwhile, robots continue to worm their way into an ever-wider
variety of jobs. In the past, they were concentrated in auto
factories and their suppliers, which still make up a large share of
all robot orders. But the A3 data shows that in recent years robots
have spread to everything from construction sites - where they are
now used to do tasks like laying down lines on floors to guide crews
on where to install walls - to hospitals and food-processing plants.
Aaron Anderson, director of innovation at Swinerton, a large
construction company based in Concord, California, said his company
has started using a robot that drills holes in concrete ceilings,
opening the way for plumbing other mechanical systems to be
installed by workers.
But Anderson said it's difficult to justify the cost of buying one
of the machines. Since construction projects vary in size and
complexity, he said, there are spells when the robot isn't needed at
all.
Swinerton's answer: It leases the machine instead, which costs far
less.
(Reporting by Timothy Aeppel; Editing by Dan Burns and Paul Simao)
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