Motors Index surges in second quarter of 2010.

Press Release Summary:

NEMA's Motors Shipment Index jumped 7.8% during second quarter of 2010. On year-over-year basis, index registered 16.1% rate of growth, but still remains approximately 16% below its peak. Of index's two underlying categories, inflation- and seasonally-adjusted shipments of fractional horsepower motors accounted for entirety of quarter's growth while demand for integral horsepower motors remained lackluster, given solid growth occurring in broader manufacturing sector.

Original Press Release:

Motors Index Surges in Second Quarter of 2010

ROSSLYN, Va., -NEMA's Motors Shipments Index (MSI) jumped 7.8 percent during the second quarter of 2010. On a year-over-year basis, the index registered a 16.1 percent rate of growth, but still remains approximately 16 percent below its peak. Of the index's two underlying categories, inflation- and seasonally-adjusted shipments of fractional horsepower motors accounted for the entirety of the quarter's growth while demand for integral horsepower motors remained surprisingly lackluster, particularly given the solid growth occurring in the broader manufacturing sector.

The U.S. economy remained on a path to recovery, but appears to be losing some steam as the second-half slowdown in growth that was widely expected might be coming a bit early. During the second quarter of 2010, real GDP expanded at a 2.4 percent annualized pace, down from the 3.7 percent gain in registered during the first three months of the year.

Inventory investment has been a significant contributor to measured topline growth since the recovery began (likely last year); since businesses are mostly finished with the restocking phase, however, growth will need to come from another source going forward. Consumer spending continues to be hampered by the debt deleveraging process while the uncertainty created by the ongoing weakness in the labor market will weigh on spending activity further.

By contrast, capital spending activity has been surprisingly robust as real business investment in equipment and software jumped more than 20 percent on an annualized basis in each of the last two quarters. The majority of spending has been directed toward IT equipment and software, but businesses have ramped up investment in capital goods as well during 2010.

Although the initial pop in capital spending is expected to decelerate as the inventory investment cycle winds down, recent gains in capacity utilization and factory output have likely taxed aging or worn-out production equipment-especially after nearly two years of slumping capital outlays. With corporate profits having rebounded strongly in the past year, businesses will have the ability to undertake new investment activity promptly should the recovery begin to gain some momentum. Until that time, however, demand for motors and other capital equipment integral to the production process will see only modest gains going forward.

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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