Press Release Summary:
Issued quarterly by NEMA, Industrial Controls Business Index is up 8.6% on year-over-year basis and has reached its highest point of current business cycle. Primary Industrial Controls and Adjustable Speed Drives index climbed 5% on quarter-to-quarter basis. Compared to second quarter of 2006, combined index rose 9.7% and has increased on year-over-year basis in each of the last 15 quarters. Overall picture for U.S. manufacturing sector, and electroindustry, remains largely positive.
Original Press Release:
Industrial Controls Shipments Surge to 7-Year High
August 21, 2007-NEMA's Primary Industrial Controls Index increased 7 percent between the first and second quarters of 2007. On a year-over-year basis, the index is up 8.6 percent and has reached its highest point of the current business cycle. The Primary Industrial Controls and Adjustable Speed Drives index, a broader measure of demand for industrial control equipment, climbed 5 percent on a quarter-to-quarter basis. Compared to the second quarter of 2006, the combined index rose 9.7 percent and has increased on a year-over-year basis in each of the last 15 quarters.
The sharp quarterly increase in shipments of industrial controls was expected given the upbeat second quarter reading on real GDP growth. Following a sluggish 0.6 percent annualized gain during the first quarter, aggregate economic growth clocked in at a 3.4 percent annualized rate of gain. Furthermore, if not for the significant drag imposed by the flagging residential construction sector, the second quarter reading would have been higher. Real GDP growth received a boost from inventories, increased federal government spending, improved balance of trade, and continued gains in business investment. The bulk of the past quarter's gain in business investment came from nonresidential construction activity, but capital spending on software and equipment still managed a modest increase of 2.1 percent annualized.
The overall picture for the U.S. manufacturing sector, and electroindustry, remains largely positive. After sagging at the beginning of the year, industrial output has increased in each of the past four months. Also, the ISM index, though slipping in July, has remained in expansionary territory for six consecutive months. Although capital spending is expected to remain at a healthy level through the remainder of 2007, it will likely begin to lose some steam as the economic expansion matures further. Corporate profits remain close to record highs, but their growth has clearly slowed during the past few quarters. In addition, many businesses are beginning to wrap up major capital spending projects. When combined with the recent instability in the equity and credit markets, businesses are expected to rein in plans for investment spending after current projects come to a close. As a result, shipments of industrial control equipment have likely reached a cyclical peak and will see only modest growth over the near-term.
The Industrial Control Business Indices are issued quarterly by NEMA. The Primary Industrial Control Index represents U.S. shipments for motor starters, contactors, terminal blocks, control circuit devices, motor control centers, sensors, programmable controllers, and other industrial control devices. Because these data have been collected for some time, the primary index illustrates the market's trend over several years. In 2001, the NEMA data collection program was expanded to include adjustable speed drives, a key energy-saving industrial component. The Primary Industrial Control and Adjustable Speed Drive Index provides a broader measure of the industrial control marketplace. Industrial control equipment, a $2.6 billion U.S. market, is primarily used in industrial applications for the control or regulation of power utilization apparatus, including motors.
This index represents monthly sales information collected by NEMA from its members, the major industrial control manufacturers in the U.S. market. Detailed information is only available to NEMA members. The data underlying these indices represent more than 90 percent of U.S. sales of this equipment. For more information, contact Walt Kozikowski, industry director, at (703) 841-3262. To view the indices, visit the NEMA website.
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.