Press Release Summary:
NEMA's Primary Industrial Controls Index increased 6.4% in second quarter of 2010 versus first quarter and registered 4 consecutive quarter-to-quarter increases. Currently 24.8% above its level last year, this gain represents largest since late 1992. Primary Industrial Controls and Adjustable Speed Drives Index posted 1.7% quarter-to-quarter rate of growth during 2010Q2 and increased nearly 24% on year-over-year basis.
Original Press Release:
Demand for Industrial Controls Registers another Solid Gain During the Second Quarter of 2010
ROSSLYN, Va.-NEMA's Primary Industrial Controls Index increased 6.4 percent in the second quarter of 2010 versus the first quarter. Overall, the index has registered four consecutive quarter-to-quarter increases and is now 24.8 percent above its year-ago level-representing the largest year-over-year percentage gain since late 1992. Even with this improvement, however, inflation- and seasonally-adjusted shipments remain more than 18 percent below their cyclical peak from two years earlier. The Primary Industrial Controls and Adjustable Speed Drives Index, a broader measure of demand for industrial controls products, posted a smaller 1.7 percent quarter-to-quarter rate of growth during 2010Q2 and increased nearly 24 percent on a year-over-year basis.
The U.S. economic recovery appears to be losing some momentum. Real GDP registered a 2.4 percent annualized rate of growth during the second quarter of 2010 and revisions to prior quarters suggest the recession was deeper than previously thought and the recovery has also been weaker to date. Inventory investment remains the key source of support for broader macroeconomic growth, as consumer spending continues to struggle under the heavy weight of debt deleveraging, mortgage defaults and uncertainty caused by a sluggish labor market. Perhaps the one bright spot to date has been the sharp rebound in capital spending activity, as real business investment in equipment and software has surged at an average annualized rate of more than 20 percent during the last two quarters. The majority of spending has been focused on productivity-enhancing IT equipment and software, but traditional capital goods have accounted for a large share of outlays due to a boost in replacement demand for industrial machinery and equipment.
While the broader economy has experienced a tepid recovery, the manufacturing sector has posted several consecutive quarters of robust output growth. In fact, its performance to date in the post-recession period has been the closest to a "v-shaped" recovery of any sector of the economy, which helps to explain the solid rebound in industrial control shipments. Manufacturing output increased 8.3 percent on an annualized basis during 2010Q2 and has posted similar rates of growth in each of the last four quarters. The upturn in manufacturing activity has brought previously idled production capacity back on-line and bolstered replacement demand for machinery and equipment, including industrial controls and speed drives. Going forward, while more factory capacity will be re-started in the coming quarters and a robust recovery in profits will support equipment investment, the inventory restocking phase that underpinned the manufacturing sector's recovery thus far is winding down, thereby dampening the outlook for output growth. As a result, NEMA's industrial controls indices are expected to register smaller gains during the second half of 2010 and into 2011.
NEMA is the association of electrical and medical imaging equipment manufacturers. 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, industrial, commercial, institutional, and residential applications. The association's Medical Imaging & Technology Alliance (MITA) Division represents manufacturers of cutting-edge medical diagnostic imaging equipment including MRI, CT, x-ray, and ultrasound products. Worldwide sales of NEMA-scope products exceed $120 billion. In addition to its headquarters in Rosslyn, Virginia, NEMA also has offices in Beijing and Mexico City.
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