The robot invasion is slowing amid the weakening US economy and high interest rates

[1/2]A worker uses a robot to place a Tundra body onto its frame at the Toyota truck plant in San Antonio, Texas, U.S. April 17, 2023. REUTERS/Jordan Vonderhaar LICENSES RIGHTS

Aug 31 (Reuters) – Even a robotic invasion cannot defeat a slowing economy.

According to the Association for Advancing Automation, an industry group, companies in North America cut orders for high-tech machinery sharply in the second quarter.

The slowdown in orders began late last year as rising interest rates and slowing economic growth dampened appetite for new robots, the group, also known as A3, said.

“We wouldn’t even think about buying a robot right now,” said Nancy Kleitsch, chief financial officer of ICON Injection Molding, a plastic components manufacturer in Phoenix.

Like many other manufacturers, ICON’s business has skyrocketed during the COVID-19 pandemic, including demand for its plastic tubes used for pandemic testing. But the demand for the tubes and other business areas of the company has now fallen to a level not seen for at least seven years, said Kleitsch.

INFLATION, GROWTH CONCERNS

Many other companies appear to share ICON’s reservations about robots. Factories and other industrial users, including e-commerce warehouses and medical testing companies, ordered 7,697 robots in the second quarter, down 37% year over year. That was followed by a 21% decline in the first quarter and 22% in the fourth quarter of last year.

Sales of robots boomed during the pandemic as manufacturers scramble to use the machines to produce much-needed goods. According to A3, 2022 was a record year for orders despite the slowdown late last year.

But robots are just one type of equipment businesses need, and other spending indicators have held up slightly better in the US economy. According to the Commerce Department, orders for non-defense capital goods, excluding aircraft – which are closely watched by economists to track trends in corporate spending – rose 0.1% in the past month’s second quarter.

“It’s not like we’ve done away with automation,” 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’re holding back.”

Some industries appear to have overinvested in robots during the recent boom. E-commerce companies, for example, rushed to build highly automated warehouses, anticipating continued strong growth in demand for goods. That’s not the case. Another problem, Burnstein said, is companies ordering too many robots, fearing supply chain delays.

“They were afraid they wouldn’t get what they needed, so they bought too much,” he said. Burnstein added that A3 expects the weakness in robot orders to continue into the fourth quarter or early next year.

EXPANSION OF `PLICATIONS

One factor that has helped boost robot sales in recent years has been a tight labor market. At 3.5% in July, the unemployment rate was close to the level last seen in more than 50 years. But the labor shortage is easing. Another indicator measuring job vacancies in the U.S. fell to its lowest level in nearly two and a half years in July as the job market slowed, the Labor Department said on Tuesday.

Meanwhile, robots are conquering more and more tasks. In the past, they’ve focused on car factories and their suppliers, which still account for a large portion of all robot orders. However, the A3 data shows that in recent years robots have spread everywhere, from construction sites – where they now perform tasks such as laying wires on floors to show workers how to install walls – to hospitals and food processing plants .

Aaron Anderson, director of innovation at Swinerton, a large construction company based in Concord, Calif., said his company has begun using a robot to drill holes in concrete pavements, paving the way for workers to install other mechanical systems.

But Anderson said it’s difficult to justify the cost of buying one of the machines. Because construction projects vary in size and complexity, there are phases when the robot is not needed at all, he said.

Swinerton’s answer: Instead, the machine is leased, which costs significantly less.

Reporting by Timothy Aeppel; Edited by Dan Burns and Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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Tim Aeppel covers the interface between business and business, with a focus on the manufacturing sector. Tim previously served as the Wall Street Journal’s chief economics correspondent after serving as the journal’s itinerant production correspondent for six years. He began his career at the Christian Science Monitor, where he created the newspaper’s first feature on environmental issues. Tim has spent much of his career following stories on the factory floors and industrial streets of the world, applying a keen eye for detail and a deep understanding of the macro forces that shape the economy. He is a graduate of Tufts University’s Fletcher School of Law and Diplomacy and Principia College.