Demand for Industrial Controls improves during 2nd quarter.

Press Release Summary:

According to NEMA, Primary Industrial Controls Index gained 2.4% over first 3 months of 2008. Index's first quarter reading was revised slightly upward to 5.1% decline. Compared to same period 1 year ago, index registered 19th consecutive increase, expanding 3.1%. Similar trend was apparent for broader measure of industrial control demand as Primary Industrial Controls and Adjustable Speed Drives index rose 3.9% compared to first quarter and 4.5% on year-over-year basis.

Original Press Release:

Strong Showing for Industrial Controls in the Second Quarter of 2008

ROSSLYN, Va., August 19, 2008- Demand for industrial control equipment improved during the second quarter, as NEMA's Primary Industrial Controls Index gained 2.4 percent over the first three months of 2008. The index's first quarter reading was revised slightly upward to a 5.1 percent decline. Compared to the same period a year ago, the index registered its 19th consecutive increase, expanding 3.1 percent. A similar trend was apparent for a broader measure of industrial control demand, the Primary Industrial Controls and Adjustable Speed Drives index. That index rose 3.9 percent compared to the first quarter and 4.5 percent on a year-over-year basis.

Given the second-quarter bump in U.S. economic growth, the rebound in demand for industrial controls was not completely unexpected. Real GDP increased at a 1.9 percent annualized rate, accelerating from the lackluster 0.9 percent observed during the first quarter of this year. Rising exports and improving consumer spending were chiefly responsible for the stepped-up pace of aggregate economic activity. A sharp drawdown in inventories, which weighed on growth, likely bodes well for manufacturing output growth over the near term. Business spending on equipment and software contracted for the second consecutive quarter, but the pullback was driven by a large drop in spending on transportation equipment. Indeed, businesses ramped up spending on tech equipment and traditional capital goods, such as industrial equipment. Moreover, the credit crunch does not appear to be affecting companies' appetites to invest in new space as nonresidential construction spending hit a new record high for the second consecutive quarter.

Manufacturing activity, though not at the level of two years ago, has remained resilient. The ISM manufacturing index dipped slightly from 50.2 to 50 between June and July, but this still indicates the sector is not seeing broad-based drop in activity. Much of the sector's pain remains concentrated among auto manufacturers and industries with strong ties to the maligned housing market. Measures of capital spending have followed an up-and-down pattern over the past several quarters, but should firm up over the near term thanks to bonus depreciation allowances stemming from the economic stimulus package. However, the largest source of support for manufacturers has been the strong gains in export demand. Thanks to steady global economic growth and a weak dollar, U.S.-manufactured goods have remained price competitive on international markets, thus providing a veritable "floor" for the sector as a whole.

NEMA is the trade association of choice for the electrical manufacturing industry. Founded in 1926 and headquartered near Washington, D.C., its approximately 450 member companies manufacture products used in the generation, transmission and distribution, control, and end-use of electricity. These products are used in utility, medical imaging, industrial, commercial, institutional, and residential applications. Domestic production of electrical products sold worldwide exceeds $120 billion. In addition to its headquarters in Rosslyn, Virginia, NEMA also has offices in Beijing, Sao Paulo, and Mexico City.

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