Good numbers: industrial controls, motion control systems, and packaging machinery
Three recent reports announce positive news for manufacturers, distributors, system integrators, and users of industrial controls, motion control, and packaging machinery, with some areas in double digits.
Rosslyn, VA, Dedham, MA, and Arlington, VA —Three recent reports announce positive news for manufacturers, distributors, system integrators, and users of industrial controls, motion control, and packaging machinery, with some areas in double digits. The reports come from National Electrical Manufacturer’s Association (NEMA), ARC Advisory Group, and Packaging Machinery Manufacturers Institute (PMMI).
National Electrical Manufacturer’s Association (NEMA) announced that its “Primary Industrial Controls Index” increased 7% between first and second quarters of 2007. On a year-over-year basis, the index rose 8.6% and has now 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, rose 5% on a quarter-to-quarter basis. Compared to Q206, the combined index increased 9.7% and has increased on year-over-year in each of the last 15 quarters. The NEMA indices are issued quarterly.
The quarterly increases were expected after the second quarter reading on real GDP growth, NEMA says. Aggregate economic growth showed a 3.4% annualized rate of gain. Without the drag of the residential construction sector, that reading would have been higher. Real GDP growth got a boost from inventories, rising government spending, improved balance of trade, and gains in business investment. The bulk of the past quarter’s gain in business investment came from non-residential construction, while capital spending on software and equipment posted a modest increase of 2.1% annualized.
NEMA reports that the overall picture for U.S. manufacturing and electroindustry remains positive. Industrial output has increased in each of the past four months. Capital spending is expected to remain at a healthy level through year end, but may lose steam as economic expansion matures further. Corporate profits are near record highs, although slower during the past few quarters. Businesses are expected to rein in plans for investment spending after current projects, affected by recent instability in equity and credit markets, are completed. Thus, industrial control equipment shipments may have reached a cyclical peak and will realize only modest growth over the near-term.
In other news, ARC Advisory Group has released a study that reports the worldwide market for general motion control (GMC) systems is expected to grow at a compounded annual rate of approximately 7% over the next five years. The market is being driven by new growth in the developing regions of Asia. An expansion, driven partially by a shift of the semiconductor industry, has occurred from industrialized high-wage economies to areas where production costs are cheaper. New technologies have also made older machines obsolete, as new form factors present a clear value proposition to upgrade.
Analyst Stefan Surpitski, principal author of ARC’s “General Motion Control Worldwide Outlook,” notes that “modular drive and motor components have enabled a step change in machine design allowing OEMs to improve on traditional designs in a myriad of ways. This technology has afforded machine builders a great deal more flexibility in design.”
The semiconductor industry did well with a capital expenditure growth of more than 11%; GMC systems are a core element in the machinery used to produce semiconductor components. Systems sold in that market are equipped with higher precision and greater dynamic performance. A majority of applications in the sector require custom solutions. The high growth is attributed to an increase in volume and sales of higher value systems. ARC adds that the role of individual packaging machines is broadening as businesses adjust to real-time market pull.
And in related news, the Packaging Machinery Manufacturers Institute (PMMI) has just released the news that U.S. packaging machinery shipments reached $6.110 billion in 2006, a 6% increase over equipment shipped in 2005, according to its “2007 Shipments and Outlook Study.” This is the fifth year that the industry has grown since 2001. Sixteen of the 17 machinery categories monitored in the annual report experienced growth last year. Two categories, wrapping (+18.6%) and capping, overcapping lidding and sealing machinery (+11.2%) had double-digit growth. Converting machinery was the only machinery category with a modest decline of -0.6%.
Exports of packaging machinery surpassed the $1 billion mark for the third consecutive year with $1.012 billion in equipment sold overseas, an increase of 0.5%, PMMI says. U.S. domestic demand, which includes domestic shipments and import figures, increased by 8.4% to $6.637 billion in sales. Domestic shipments rose 7.2% to $5.098 billion, and imports were up 12.6% with 1.539 billion in sales.
“U.S. domestic demand for packaging machinery has been particularly strong for the past three years with 9.8% growth in 2004, 7.6% growth in 2005, and last year’s 8.4% growth,” said Charles D. Yuska, president and CEO of PMMI. “While things have slowed in 2007, capacity levels remain high, and we expect consumer goods companies to continue their past buying patterns at slightly moderate terms.”
U.S. packaging shipments are expected to grow at an average annual rate of 3.1% over the next three years, while growth this year is forecast to be essentially flat at 0.5%.
The executive summary of the 2007 study is available on PMMI Website; PMMI sells the complete study for $2,500 (non-member price).
—Edited by Barb Axelson , contributing editor
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