NEMA Indexes Express Fluctuations
March 11, 2008—
The Primary Industrial Controls Index experienced healthy growth in 2007, rising 8.3 percent in the fourth quarter, but the index appears as though it will decline in 2008. For the entire calendar year, the index grew 6.2 percent, proving to be the most successful year of growth since 2004 and reached the highest level since 1997. The National Electrical Manufacturers Association’s (NEMA) Primary Industrial Controls and Adjustable Speed Drives Index, measuring broader demand for industrial controls, rose 6.7 percent over the previous quarter and 11.4 percent on a year-over-year basis. For the entire year 2007, the index was up 7.9 percent.
Over the past few months, the U.S. economy experienced stunted growth as consumer spending was at its slowest in years, residential investment declined considerably, inventories shrunk and the balance of trade was weak, even with the declining dollar. GDP growth surged in the third quarter of 2007, only to relatively freeze for the last quarter. Business investment was brighter, growing steadily due to spending on nonresidential structures. These factors indicate that prospects for the manufacturing sector are dimming and industrial control shipments are likely to weaken in 2008.
NEMA’s Motors shipments Index showed similar tendencies in 2007, shrinking 7.3 percent quarter-to-quarter during the final three-month period of the year. The index slipped almost 7 percent on a year-over-year basis, imitating similar activity from four of the last five quarters. After showing double-digit growth the past two consecutive years, the index declined 3.5 percent over the full calendar year. These discouraging numbers are the result of a sharp fall in fractional horsepower motor shipments linked to the U.S. housing market slump; however, recent integral horsepower motor demand has been sturdy during the recent dips. On a more upbeat note, the industrial sector is anticipated to experience positive growth in the near future, due to export demand, business investment and inventory replenishment.