By a lot of measures, the U.S. economy—and manufacturing, in particular—are doing pretty well.

Manufacturing employment has grown for 16 straight months and is now at its highest level since April 2009, according to the Bureau of Labor Statistics. Overall, U.S. employers have added more than 2.2 million jobs so far this year, and the unemployment rate has plunged to a six-year low of 5.8 percent.

Manufacturing operations were running at 77.2 percent of capacity in October. That’s up from the 10-year low of 63.9 percent in 2009, and it’s near prerecession levels, according to the Federal Reserve. U.S. factory output is up 3.4 percent so far this year, after rising 2.6 percent in 2013.

Manufacturing firms are increasingly confident, according to the Institute for Supply Management, a trade group of purchasing managers. The organization’s manufacturing index hit 59 in October, matching a three-year high reached in August. Any reading above 50 signals expansion, and the index has averaged 55.8 from November 2013 through October 2014.

Spending on construction or renovation of factories is up 12.6 percent, according to the Census Bureau. And, according to the Equipment Leasing and Finance Association, equipment financing activity skyrocketed in September, rising 31 percent from August and 21 percent year-over-year.

More than 50 percent of companies plan to increase U.S.-based production by at least 5 percent during the next three years, according to a study released in May by the consulting firm Accenture. Better yet, nearly a quarter of companies expect to grow U.S.-based manufacturing by more than 10 percent.

In every industry we cover, manufacturers are pouring money into their assembly operations. In just the past few months, several companies have announced significant investments:

Embraer is building a new assembly plant in Melbourne, FL, that could employ 600 people.

GM is adding 210,000 square feet to its Lansing Delta Township assembly plant as part of a $37 million expansion.

Varian Medical Systems is expanding its assembly plant in Salt Lake City and plans to add 1,000 jobs over the next 20 years.

InSinkErator will open a new assembly plant in Racine, WI, creating an estimated 165 jobs. The company also plans to spend $43.7 million to upgrade equipment at its existing facilties.

United Furniture Industries is investing $5.2 million to expand its assembly plant in Winston-Salem, NC, with plans to create 200 new jobs over the next three years.

Such reports portend a healthy climate for capital equipment investment next year, and the results of our 19th annual Capital Equipment Spending Survey indicate that manufacturers will significantly increase spending on assembly technology in 2015.

Specifically, U.S. assembly plants will spend $3.35 billion on new equipment in 2015, an increase of 14 percent from the $2.94 billion projected to be spent in 2014.

Some 31 percent of respondents will spend more on assembly technology next year than they did this year, and 45 percent will spend the same as they did in 2014. Only 25 percent of respondents will spend less in 2015 than they did 2014.

On average, manufacturers will spend $737,935 on assembly technology in 2015. That compares with $215,271 in 2014, and it’s the highest average since 2010.

Aggregate budget data confirm that spending should increase sharply next year. For example, 28 percent of plants will spend between $100,000 and $500,000 next year, compared with
21 percent in 2014. Similarly, 11 percent of plants will spend more than $500,000 in 2015 vs. 8 percent in 2014. On the low end, 61 percent of plants will spend less than $100,000 next year, compared with 71 percent in 2014.

Regardless of how much they spend on capital equipment next year, assemblers continue to expect a quick return on investment (ROI). Next year, only 31 percent of plants have an ROI period of at least two years. That marks the fifth straight year in which that percentage has been below 35 percent. This may be due to shorter product life cycles, Wall Street pressure, or tax law issues.

Spending Motives

With U.S. factories running at over 77 percent capacity, it’s no surprise that more and more facilities are looking to increase output. Forty percent of plants will buy equipment next year to increase capacity or assemble higher volumes of existing products. That’s the highest percentage in six years.

Replacing old equipment continues to be a priority for ASSEMBLY’s readers. Nearly half—48 percent—of U.S. assembly plants will replace old or worn-out machinery next year. That’s the highest percentage in the history of our survey, and it’s the fourth straight year that ratio has been over 40 percent.

A recent study by Morgan Stanley corroborates that data. The financial services firm found that the average age of industrial equipment in the United States has risen above 10 years, the highest since 1938.

If there’s any cause for alarm in this year’s data, it’s this: For second straight year, just 23 percent of plants will buy equipment next year to assemble a new product. That figure has declined steadily since 2009, and it ties an all-time low for our survey.

That low figure could reflect cutbacks in R&D spending that began during the Great Recession. The United States is still the worldwide leader in R&D spending, and it has been for a long time. However, our share of global R&D spending—31.1 percent in 2014, according to the Battelle Institute—has been flat or even decreased slightly during the past three years. At the same time, our economic rivals have gradually increased their research spending. For example, China’s share of the global R&D pie has increased from 15.3 percent in 2012 to 17.5 percent in 2014.

A more benign explanation to the low amount of assemblers buying equipment to make new products is this: Existing equipment may already be capable of handling the newer designs. The desire for more flexible assembly technology is reflected in the growing popularity of robots and servo-driven motion control systems. In addition, given the shorter life cycles of today’s products, engineers are increasingly designing products and processes to accommodate design variations.

Quality improvement has become less important to assemblers during the past 19 years. Just 12 percent of
assembly plants will invest in technology to boost product quality next year. That ties a record low set in 2012.

That low percentage may indicate that U.S. manufacturers have fully embraced the quality revolution that began the early ’80s. Companies have made a concerted effort to design quality into their products and processes, rather than trying to add it in after the fact. Once a product differentiator, quality now is a given in today’s marketplace.

Other motives for buying equipment include:

• cost reduction, 51 percent.
• reduce cycle time or eliminate a bottleneck, 31 percent.
• implement lean manufacturing, 23 percent.
• increase safety, 22 percent.

Cost Targets

For the fifth straight year, the top three targets for cost reduction are direct labor (73 percent), indirect labor (38 percent) and scrap (35 percent).

As manufacturers increase their consumption of exotic materials, such as composites and titanium, a growing number are concerned over the cost of those materials. Some 27 percent of assembly plants are looking to lower their material costs next year. It’s the third straight year in which that percentage has been above 25 percent.

Despite the epidemic of automotive recalls this year, only 11 percent of plants are looking to lower their warranty and field-service costs next year. That compares with 8 percent this year, and it marks the fourth straight year in which that figure has been under 20 percent.

Eighteen percent of plants are hoping to reduce work-in-process (WIP) inventory next year, compared with 11 percent in 2014.

With assemblers less concerned about WIP, there’s evidently less demand for conveyors and material handling equipment. Only 18 percent of plants expect to purchase pallet-transfer conveyors, roller conveyors and other material handling technology next year. That compares with 21 percent in 2014, and it’s a record low for this technology category.

On average, assemblers will dedicate 3 percent of their 2015 budgets to conveyors, the same ratio as 2014. All totaled, assemblers will spend $100.7 million on material handling technology next year, a 14 percent increase from 2014.

What Assemblers Want

For the sixth time in the past eight years, power tools will be the No. 1 item on assemblers’ shopping lists next year. Some 68 percent of assembly plants will purchase impact wrenches, cordless screwdrivers, DC electric nutrunners, handheld riveters and other power tools in 2015. Thatcompares with 65 percent in 2014, and it’s the highest percentage since 2010.

On average, assemblers will dedicate 12 percent of their 2015 budgets to electric and pneumatic tools, compared with 13 percent in 2014. All totaled, assemblers will spend $234.7 million on tools next year. That’s a 20 percent increase from 2014, and it’s the highest total in 11 years.

The increased demand for power tools is ironic in that, until last year, screwdriving had always been the most popular method for assembling parts. That changed in 2013, when welding emerged as the top joining method. Welding is now performed at 56 percent of assembly plants, whereas 48 percent perform screwdriving.

Thus, it’s no surprise that 46 percent of plants will buy welding, brazing or soldering equipment in 2015. That compares with 47 percent in 2014 and 32 percent in 2011. On average, assemblers will dedicate 9 percent of their 2015 budgets to laser welders, resistance welders, soldering robots and other equipment next year, down from 10 percent in 2014. All totaled, assemblers will spend $302 million on welding, brazing and soldering equipment next year, 9 percent more than in 2014.

The North American robotics industry is already having a good year, according to the Robotic Industries Association. A record 14,135 robots, valued at $788 million, were ordered from North American robotics companies in the first half of 2014, an increase of 30 percent in units and 16 percent in revenue over the same period in 2013.

Such investment will likely continue next year. A healthy 21 percent of plants will buy SCARAs, grippers, tool changers and other robotic technologies in 2015. That compares with 13 percent this year, and it’s the second highest percentage in the history of our survey. All totaled, assemblers will spend $117.4 million on robots next year, 14 percent more than in 2014 and the most since 2010.

More than 52 million cars and trucks have been recalled in the United States this year. That record-breaking number is leading to major losses for car companies and major headaches for consumers. Traceability is weighing heavily on the minds of manufacturers across the supply chains of every industry.

Small wonder, then, that 39 percent of assembly plants—a record high—will invest in automatic identification technology next year. On average, assemblers will dedicate 5 percent of their 2015 budgets to label printers, Data Matrix code readers, radio frequency identification systems and other equipment next year, up from 3 percent in 2014. All totaled, assemblers will spend $154.3 million on auto ID technology next year, 83 percent more than in 2014.

For similar reasons, perhaps, computers and software also rank high on assemblers’ shopping lists this year. In fact, computers and software have ranked as the second most popular assembly technology in three of the past four years. Next year, 62 percent of plants will buy design analysis software, manufacturing execution systems, statistical process control software and other information technology next year, up from 60 percent in 2014.

On average, assemblers will dedicate 11 percent of their 2015 budgets to computers and software, up from 10 percent in 2014. All totaled, assemblers will spend $290 million on IT next year, 45 percent more than in 2014.

2014 is shaping up to be a banner year for suppliers of inspection technology. For example, total sales of machine vision components and systems increased 11 percent to $1.04 billion in the first half of 2014, according to new statistics issued by AIA, the industry’s trade group. This is the best first-half performance by the North American machine vision market since AIA began tracking quarterly statistics in 2009.

The industry can expect that trend to continue next year. Fifty-one percent of plants—a record high—will invest in vision systems, laser sensors and other inspection technology next year, up from 49 percent in 2014.

On average, assemblers will dedicate 8 percent of their 2015 budgets to inspection technology, the same ratio as 2014. All totaled, assemblers will spend $268.4 million on inspection t
echnology next year, 14 percent more than in 2014.

About the only technology category that won’t enjoy at least a modest increase in spending next year is parts feeders. In 2012, 22 percent of plants bought parts feeders. That figure has gradually declined ever since. Next year, just 12 percent of plants will buy bowl feeders, centrifugal feeders and similar machines, a record low.

On average, assemblers will allocate just 1 percent of their budgets next year to parts feeders, down from 2 percent in 2014. In all, manufacturers will spend $50.3 million on feeders in 2015, 32 percent less than they did this year.

Size Matters

Not surprisingly, the nation’s largest assembly plants have emerged from the Great Recession with pent-up demand for assembly technology and the capital to get it. On the other hand, the nation’s smallest manufacturers might have the same need, but not the capital.

A look at the numbers tells the story. Some 33 percent of plants with at least 200 employees plan to spend more next year, while 23 percent expect to spend less. Those figures are virtually the opposite for plants with 20 employees or less. Only 25 percent of these plants will spend more in 2015, while 31 percent will spend less.

Compared with smaller facilities, plants with more than 200 employees are more likely to buy equipment to:

• Increase capaciety (48 percent vs. 40 percent for all U.S. plants).
• Increase safety (32 percent vs. 22 percent for all U.S. plants).
• Reduce cycle time (55 percent vs. 31 percent for all U.S. plants).
• Implement lean manufacturing (42 percent vs. 23 percent for all U.S. plants).

On average, plants with more than 200 employees will spend $2.8 million on assembly technology next year, the highest average in five years. Together, they will spend more than $1.8 billion next year—56 percent of total spending.

Compared with larger facilities, plants with 20 or fewer employees are less likely to buy equipment to:

• Increase capacity (24 percent vs. 40 percent for all U.S. plants).
• Reduce cycle time (13 percent vs. 31 percent for all U.S. plants).
• Increase safety (13 percent vs. 22 percent for all U.S. plants).
• Implement lean manufacturing (2 percent vs. 23 percent for all U.S. plants).

On average, plants with 20 or fewer employees will spend $152,471 on assembly technology next year. As a group, they will spend some $268.4 million next year, accounting for 8 percent of total spending.

Transportation Equipment

North American car and truck production totaled approximately 1,672,685 vehicles in October, up 3 percent compared with October 2013. The North American automotive industry has now produced 1 million vehicles for a record 39 months in a row. The industry is on pace to produce some 16.8 million vehicles this year. It could top the 17 million mark next year and the 18 million mark in 2017.

Responding to demand, the industry is investing in people, plants and equipment. In just the past few months:

Otics USA Inc. said it will invest $69.5 million to construct an auto parts assembly plant in Sevierville, TN, creating 117 new jobs.

Nissan said it will expand its North American manufacturing workforce by 1,000 workers to meet expanded production goals.

General Motors Corp. announced it will invest $240 million at its Warren (MI) Transmission Plant to build electric drive units for the second-generation Chevrolet Volt.

Ford Motor Co. said it will add 850 new factory jobs at its factories here to support the all-new aluminum-intensive F-150 pickup truck.

The automotive industry isn’t the only part of the transportation equipment sector (NAIC 336) that’s doing well. The entire sector is humming:

In June, Boeing announced that it had won a $7.4 billion order for 80 737 jets from China Eastern Airlines Corp. It was the aerospace giant’s largest order ever. Through May, Boeing’s commercial airplane backlog stood at 5,200 airplanes.

Daimler Trucks has been hiring workers for its assembly plant in Cleveland, NC, since April and wants to have more than 1,000 new employees by the end of the year.

Siemens Rail Automation expanding its manufacturing and engineering operations in Pittsburgh, creating 129 jobs.

Armstrong Marine Inc. will invest more than $8.4 million to build a new assembly plant in Swansboro, NC, to make welded aluminum boats. The facility could create 200 jobs.

Polaris Industries will spend $1.75 million to expand its engine assembly plant in Osceola, WI, a move that will create 60 new jobs and retain 200 old jobs.

Manufacturers in this industry will spend, on average, a whopping $3,159,431 on assembly technology in 2015. That’s the highest average for this industry since 2002. Two-thirds of all facilities with million-dollar budgets are transportation equipment manufacturers.

All totaled, the industry will spend more than $1 billion on assembly technology in 2015, accounting for 31 percent of total spending.

This industry continues to introduce new products. A healthy 35 percent of the plants in NAIC 336 are buying equipment next year to make a new product. That compares with 23 percent for all industries, and it marks the ninth consecutive year that this percentage has been above the national figure.

After several years of overcapacity, the industry may finally be reaching its limits. Some 51 percent of plants in NAIC 336 (compared with 40 percent for all U.S. plants) will purchase equipment next year to increase capacity. Similarly, 37 percent of plants in NAIC 336 (vs. 31 percent for all U.S. plants) will purchase equipment next year to reduce cycle time.

Given the recall debacle of the past two years, it’s hardly surprising that this industry is interested in improving quality. Indeed, 23 percent of plants will be shopping for quality-enhancing technology next year. That’s almost twice the figure for all U.S. plants, and it’s the second straight year that this percentage has been above the national figure.

“Lean” continues to be a mantra in this industry. Some 29 percent of plants in NAIC 336 are getting equipment next year to implement lean manufacturing. That’s more than any other industry, marking the fourth straight year that the industry has held that distinction.

Safety is another concern. Thirty-six percent of plants are buying equipment to improve safety or ergonomics next year. That’s more than any other industry, and it’s the fourth straight year that the industry has led the nation in safety-conscious plants.

As for assembly technology, manufacturers of transportation equipment are more likely to buy robots (48 percent vs. 21 percent for all plants), conveyors (33 percent vs. 18 percent for all plants), motion control technology (23 percent vs. 14 percent for all plants), auto ID technology (50 percent vs. 39 percent for all plants), computers and software (81 percent vs. 62 percent for all plants), and workstations (48 percent vs. 41 percent for all plants).

Machinery Manufacturing

In August, CNH Industrial announced that it would invest $24 million to expand tractor production at its assembly plant in Burlington, IA. The project will create approximately 50 full-time jobs.

Four months earlier, Baker-Hughes Oilfield Operations Inc. opened a new manufacturing center in Oklahoma City that will create 475 jobs over the next five years. The company plans to invest between $128 million and $150 million on the facility, which will be among company’s first to incorporate high-tech robotics.

Machinery manufacturers (NAIC 333) are less likely to continue such investment in the coming year. While 33 percent of plants in this industry expect to spend more next year than they did this year, actual budget figures signal a bit of retrenchment.

Average per-plant spending in this industry has declined each year since 2011. In 2015, manufacturers of lawn tractors, printing presses, photocopiers, pizza ovens, elevators and turbines will spend just $70,793 on assembly technology, the lowest average for this industry in 17 years. In 2011, 22 percent of plants in NAIC 333 spent at least $1 million. Next year, only 2 percent will do so.

All totaled, the industry will spend $134.2 million on assembly technology in 2015, accounting for just 4 percent of total spending. Both figures are all-time lows for the industry

One reason for the lack of investment is that the industry does not need to upgrade equipment. Only 38 percent of plants in NAIC 333 will replace old or worn out equipment next year. That compares with 48 percent for all U.S. factories, and it’s the second straight year in which that ratio has been under 40 percent.

The industry may also have met its capacity needs in recent years. In 2013 and 2014, half the factories in this industry ordered equipment to boost capacity. Next year, only 37 percent will do so, a four-year low.

Compared with other industries, manufacturers in NAIC 333 are more likely to buy power tools (82 percent vs. 68 percent for all plants); welding, brazing and soldering equipment (55 percent vs. 46 percent for all plants); inspection equipment (60 percent vs. 51 percent for all plants), and test equipment (46 percent vs. 42 percent for all plants).

Computers and Electronics

In November, Amerlux relocated to a new 200,000-square-foot assembly plant in Oakland, NJ. The manufacturer of energy-efficient lighting plans to boost its workforce by 40 percent.

Six hundred miles west, in Troy, MI, contract manufacturer Unified Business Technologies announced that it would be adding 171 jobs over the next three years after winning an Army contract to make components for surveillance and communications.

Such investment might be hard to find in the computer and electronics manufacturing industry (NAIC 334) next year. Half the plants in the industry (52 percent) will spend less on assembly technology next year than they did this year. That’s the highest percentage of any industry.

To be fair, however, this industry was underrepresented in this year’s survey. Whereas 16 percent of ASSEMBLY’s readers are in NAIC 334, only 8 percent of the survey respondents were from that industry.

Even so, 2015 will mark the third straight year in which the electronics industry has exceeded the national percentage for factories planning to spend less in the coming year.

Budget figures tell the story. In 2015, electronics manufacturers will spend, on average, just $79,644 on assembly technology. That’s the lowest figure since we adopted the NAICS system in 2005. Although our survey found no electronics assembly plants with million-dollar budgets, 20 percent of facilities will at least spend between $250,000 and $999,999 next year.

As a group, assemblers of clocks, disk drives, phones, radar, thermostats, microchips and other electronic devices will spend $301.9 million on assembly technology next year, accounting for 9 percent of total spending.

Those facilities that will spend money next year will likely be replacing old equipment. Some 59 percent of plants in the industry will replace old or worn-out equipment next year. That’s more than any other industry, and it marks the fourth straight year in which this industry has been above the national figure in that regard.

Of course, it’s difficult to make plans for investment when sales are down. According to the IPC, total North American PCB shipments decreased 2.8 percent in September 2014 from September 2013. For the first nine months of 2014, shipments are down 1.2 percent while bookings are down 4.2 percent.

The book-to-bill ratio—calculated by dividing the value of orders booked over the past three months by the value of sales billed during the same period—fell below parity to 0.99. A ratio of more than 1 suggests that current demand is ahead of supply, which is a positive indicator for sales growth over the next three to six months. A ratio of less than 1 indicates the reverse.

Aside from electronics assembly equipment, manufacturers in NAIC 334 are more likely to buy dispensing equipment (48 percent vs. 20 percent for all plants), multistation automated assembly systems (33 percent vs. 16 percent for all plants), automatic screwdriving equipment (39 percent vs. 25 percent for all plants), computers and software (81 percent vs. 62 percent for all plants), test equipment (57 percent vs. 42 percent for all plants), inspection equipment (70 percent vs. 51 percent for all plants), and workstations (71 percent vs. 41 percent for all plants).

Fabricated Metal Products

In November, hinge and hardware manufacturer Blum Inc. announced it would spend $28.5 million to upgrade machinery and equipment at its assembly plant in Denver, NC.

Our survey indicates that such investments should continue in the coming year. One third of factories in the fabricated metal products industry (NAIC 332) will spend more next year than they did this year. Only 23 percent will spend less.

On average, manufacturers of windows, cans, springs, bearings, guns and other products will spend $294,038 on capital equipment in 2015. That’s the highest average for this industry since 2013.

While the number of plants spending $1 million or more is about the same (3 percent in 2015 vs. 2 percent in 2014), there’s an uptick in midrange budgets. Fifteen percent of plants in this industry will spend between $250,000 and $999,999 next year, up from 2 percent in 2014.

Collectively, the fabricated metal products industry will commit $536.8 million to assembly technology in 2015, accounting for 16 percent of spending. Only the transportation equipment and medical device industries have larger shares.

Cost control is a major reason for capital investment in this industry. Two-thirds of facilities will buy equipment next year to cut costs. That’s the most of any industry, and it marks the second time in four years that NAIC 332 has led all industries in that percentage.

Another reason for the increase may be aging equipment. Fifty-six percent of plants in NAIC 332 will buy equipment next year to replace old machines, the most of any industry.

On the other hand, the industry is still dealing with some overcapacity. Only 36 percent of plants in NAIC 332 are looking to increase capacity next year. That compares with 40 percent for all U.S. plants, and it’s the fifth straight year that NAIC 332 has fallen below the national norm.

Compared with other industries, manufacturers in NAIC 332 are more likely to buy assembly presses (26 percent vs. 23 percent for all plants); welding, brazing and soldering equipment (54 percent vs. 46 percent for all plants); and tooling (63 percent vs. 54 percent for all plants).

Electrical Equipment and Appliances

2014 has been a pretty good year for the electrical equipment and appliance industry (NAIC 335). In May, for example, Electrolux announced that it would spend $30 million on its assembly plant in Anderson, SC, which produces top-mount refrigerators as well as under-the-counter models. This investment is in addition to a prior $30 million investment the company made recently in the facility, which added an R&D center and other improvements.

In July, Custom Cooler Inc., a manufacturer of custom coolers and freezers, said it would invest $5.8 million to build a new assembly plant in Elkton, KY, creating 75 jobs. That same month, Daikin Applied Manufacturing, a maker of air conditioners, began building a $9 million expansion project in Owatonna, MN. The project is expected to create 40 new jobs.

Such investment may not be norm next year. Only 17 percent of manufacturers in NAIC 335 expect to spend more next year than they did this year—the least of any industry. On the other hand, only 20 percent expect to spend less, compared with 25 percent for all U.S. plants.

Actual budget figures provide a more complete story. Electrical equipment manufacturers will spend, on average, $130,267 on assembly technology in 2015, the lowest average in 11 years. Although no facilities in this industry reported million-dollar budgets for 2015, 15 percent of plants will spend between $250,000 and $999,999, up from 5 percent in 2014.

All totaled, assemblers of lamps, refrigerators, mixers and other electrical products will spend $301.9 million on assembly technology next year, accounting for 9 percent of total spending.

Cost control is less of an issue in the electrical equipment industry than other industries. Only 35 percent of plants in this industry will buy machinery next year to lower costs. That’s much less than the 51 percent for all U.S. plants, and it’s the third straight year in which the industry has been below the national figure.

New products are the key to growth in this industry, so it’s no surprise that 36 percent of manufacturers in NAIC 335 are buying equipment to assemble something new, the most of any industry. In fact, it’s the third straight year in which appliance makers have led all industries in that regard, and it’s the 17th time in 19 years that the industry has been above the national norm for new product development.

 Compared with other industries, manufacturers in NAIC 335 are more likely to buy assembly presses (39 percent vs. 23 percent for all plants); auto ID equipment (43 percent vs. 39 percent for all plants); test equipment (68 percent vs. 42 percent for all plants); inspection equipment (57 percent vs. 51 percent for all plants); wire processing machines (24 percent vs. 8 percent for all plants); and packaging equipment (44 percent vs. 37 percent for all plants).