Press Release Summary:
NEMA's Primary Industrial Controls Index registered 2.3% quarter-to-quarter increase during fourth quarter of 2009. After it plunged over 34% from its peak within 4 quarters, this index has managed to post gains in each of last 2 quarters. Primary Industrial Controls and Adjustable Speed Drives Index, which serves as broader measure of demand for industrial controls market, also recorded second consecutive quarter-to-quarter increase, with 4.1% gain during fourth quarter of 2009.
Original Press Release:
Industrial Controls Indices Rises for Second Consecutive Quarter
ROSSLYN, Va.-NEMA's Primary Industrial Controls Index registered a 2.3 percent quarter-to-quarter increase during the fourth quarter of 2009. After the index plunged more than 34 percent from its peak in just the span of four quarters, it has managed to post gains-albeit modest ones-in each of the last two quarters. The Primary Industrial Controls and Adjustable Speed Drives Index, which serves as a broader measure of demand for the industrial controls market, also recorded its second consecutive quarter-to-quarter increase with a 4.1 percent gain during 2009Q4. With that said, demand remains at a low level as the index is still down 18.5 percent on a year-over-year basis.
The U.S. economy appeared to gain some momentum during the fourth quarter of 2009, expanding at a 5.9 percent annualized rate to finish the year. However, the underlying components of growth do not portray a broad-based recovery. For example, inventories contributed a significant proportion of calculated growth in real GDP during the 2009Q4 and the current turn in the inventory cycle is not expected to last beyond the next couple of quarters. One surprising result from the Q4 GDP release was a stronger-than-expected gain in business investment spending on equipment and software, suggesting that companies are beginning to show some confidence in near-term economic prospects.
The recent turn in the inventory cycle along with surging exports are the key sources of support to manufacturing activity. However, this is more of an ephemeral boost and the manufacturing sector's long term recovery will likely result from additional growth in export demand as well as capital spending. The recent upturn in manufacturing activity will generate some replacement demand for industrial controls and other equipment used to regulate production processes. This boost will be somewhat limited until a larger share of productive manufacturing capacity comes back on line as the national average capacity utilization rate remains well below long-term historical norms,. In addition, until companies regain more access to debt capital, firms will find it difficult, as well as risky, to invest in new plant equipment and machinery-particularly when concerns over the economic recovery's staying power remain palpable.
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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