The market for MV components and systems in North America has been highly turbulent in recent years.  During the Great Recession, sales growth nearly stalled at 1.2% in 2008 and then dropped precipitously in 2009 by an unprecedented -29.2%.  Earlier, during the 2002 US recession, the business cycle exacted a high toll, with MV sales plummeting by -14.8%.  So when the Great Recession struck in 2008-09, the influence of the business cycle was hardly unknown.  However, nothing could have prepared the MV industry in North America for the extent of damage that occurred.  Nearly one-third (29.2%) of the market shrunk between 2008 and 2009!

Recovery from Recession

But like a rubber ball, what goes down can bounce back up, and that is exactly what happened with machine vision sales in 2010.  Following the Great Recession, a recovery began in 2010, bringing a dramatic uptick in MV sales of 60.2% in response to strong, pent-up demand.   As a result, sales in that year were well above trend.

In the year that followed, 2011, the fever pitch of sales activity continued with volumes well above the historical trend line.

As of this writing, we are unable to draw on a full four quarters of data for 2012.  (Fourth quarter results of large, publicly-traded companies won't be released until February, 2013.)  However, with available, actual data for 2012, sentiment scores taken from the last AIA Quarterly Tracking Report, economic forecasts, and a trend analysis, we were able to forecast 2012 sales.  Based on our forecast, and the strength of 2011 sales, we expect a percent annual change in sales of -2.4% in 2012. 

It is important to note that the lower rate of sales growth of 4.7% in 2011 reflects primarily the strong sales volumes of 2010.   By contrast, the forecast rate of sales growth of -2.4% for 2012 derives from satisfaction of much of the pent-up demand occurring in the preceding years of 2010 and 2011.  Additionally, the rate of sales growth for 2012 reflects a reduction in demand during that year caused by a slowing US manufacturing sector.  This is indicated by both the average, annual US Purchasing Managers Index (PMI), which measures expansion/contraction of the manufacturing sector, and US industrial production. (Both indicators are shown below for years 2010-13.)

US Manufacturing Indices

Positive Trend

We must also note that while the business cycle largely explains fluctuations in MV sales, there is additionally a strong, positive trend component to MV sales that we believe results from machine vision's value proposition of increased productivity, greater efficiency and enhanced product quality.   Both a visual examination of MV sales data plotted over time and a regression analysis leave little doubt that despite the vagaries of the business cycle, MV sales in North America have generally followed an upward trajectory.  What this means is that sales volumes have fluctuated around a trend line that has exhibited a decidedly positive slope.   This trend line is readily discernible from historical sales data, as shown by the following plot of total machine vision financial transactions (which are the sum of total MV component and system sales).

For 2013 we expect annual MV sales to approach the trend line.  As a result, MV sales growth should re-enter positive territory with a rate of growth of +2.6% in 2013. 

Our 2013 forecast is not only based on a linear extrapolation of the MV sales trend line but also recent sales performance and economic forecasts for the US manufacturing sector (as previously indicated).  We also validated our 2013 forecast with the results of a sentiment survey that identified industry expectations as positive for 2013, with an overwhelming portion (59%) of survey respondents predicting sales growth.

If the industry is correct in its expectations and our 2013 MV sales forecast is accurate, machine vision companies selling into the North American market should do reasonably well.  But of course there are no guarantees.  Unforeseen events can and do occur, throwing off the most meticulously derived forecasts.  For example, partisan intransigence in the US Congress could result in a budgetary deadlock, with the US economy hurdling over the so-called "fiscal cliff".   Additionally, a war with Iran could result in a spike in the price of oil, which would devastate the US economy.   A negative, spill-over effect from Euro-zone troubles could similarly wreak economic havoc.   However, as of now at least, we assume these events will not occur and the overall US economy and manufacturing sector will continue to exhibit weak growth.  We therefore expect 2013 to be a year of sales growth for machine vision companies.