Industrial Controls Shipments plunge during 1st quarter.

Press Release Summary:

NEMA's Primary Industrial Controls Index experienced largest quarter-to-quarter decline on record, contracting more than 23% in 1st quarter of 2009 versus 4th quarter of 2008. On year-over-year basis, index showed rapid downward movement, dropping 30.5% compared to 1st quarter of 2008. Conditions in broader industrial controls market were also weak, but slightly less so, as this metric slipped 19.6% from prior quarter and more than 26% on year-over-year basis.

Original Press Release:

Industrial Controls Shipments Plunge During the First Quarter of 2009

( Rosslyn, Va.) May 12, 2008- NEMA's Primary Industrial Controls Index experienced its largest quarter-to-quarter decline on record, contracting more than 23 percent in the first quarter of 2009 versus the fourth quarter of 2008. On a year-over-year basis, the index showed a very rapid downward movement, dropping 30.5 percent compared to the first quarter of 2008. Indeed, just five quarters removed from registering a record high, inflation-adjusted shipments of industrial control equipment have fallen to their lowest level since 1991. Conditions in the broader industrial controls market, as measured by the Primary Industrial Controls and Adjustable Speed Drives index, were also weak, but slightly less so, as this metric slipped 19.6 percent from the prior quarter and more than 26 percent on a year-over-year basis.

The U.S. economy is in the midst of its deepest recession since at least the early 1970s, as real GDP has contracted at an average annualized rate of more than 6 percent over the last two quarters. Business investment has been especially hard hit and demand for industrial controls has mirrored that of other types of capital equipment over the past few quarters. Indeed, during the first quarter of 2009, real business spending on equipment and software plummeted nearly 34 percent on an annualized basis-the largest decline in 51 years. Increasingly tight lending standards, slumping profits, declining industrial output and a deteriorating labor market have caused businesses to rein in spending on new construction and expansion plans.

Manufacturing continues to take hits from all sides in the current economic downturn, and in fact the factory sector is suffering the deepest recession in the post-WWII era. While much has been made of the Detroit automakers' struggles, the manufacturing sector's turmoil extends far beyond autos as producers of industrial and business equipment as well as consumer goods are seeing steep declines in output. The national average capacity utilization rate remains at an all-time low; 65 percent of operable factory capacity is currently in use for the sector as a whole, with readings in the low 30s for a few particularly hard-hit industries. On a positive note, it appears that the worst of the collapse in manufacturing activity is over; nonetheless, prospects for a speedy recovery are miniscule at this time. Demand for industrial controls and similar capital goods will remain weak for the next several quarters as businesses try to restore profitability by downsizing operations, liquidating inventories and delaying/canceling investment plans.

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 and Mexico City.

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Contact: Brian Lego

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