Controls index drop no indication of slowdown in growth

Rosslyn, VA —A drop in the industrial controls business index does not signal an end to the market’s recent growth, the National Electrical Manufacturers Association (NEMA) reports. The drop, NEMA believes, reflects seasonal weakness in fourth quarter sales, not any major loss in momentum in the industrial controls field. The organization’s primary industrial controls index fell 2.3% between the Q3 and Q4 2005.

Sales of industrial control products and systems in Q4 2005 rose 7.2% over Q4 2004. The increase was the ninth consecutive quarter of year-over-year growth in the index. The index’s annual average for 2005 reached 87.7, more than 5% above 2004 and the highest reading since 2000.

Short-term interest rates, says NEMA, have had no measurable effect on the industrial controls market, despite a consistent series of 25 basis-point hikes by the Federal Reserve. The interest rate environment is expected to become more neutral with respect to demand for industrial control equipment, as most economists anticipate the Federal Reserve will stop raising the federal funds rate by its next meeting at the end of March.

“Manufacturing sector growth will remain a key source of demand for industrial controls and adjustable speed drives,” says Brian Lego, NEMA’s director, economic analysis. “During the fourth quarter of 2005, the factory-operating rate registered its highest reading since the third quarter of 2000 and total manufacturing output excluding high-tech industries increased to a new all-time high. Rebuilding Gulf Coast areas damaged by hurricanes will bolster goods production during the first half of 2006. Renewed inventory rebuilding will provide a measurable boost as well, as manufacturers ramp up production so that wholesalers and other businesses can replenish stocks. Finally, the business investment environment will remain a positive factor for manufacturing activity, as near-record profits have left businesses flush with cash and ready to spend on industrial machinery and equipment.”

NEMA issues its industrial control business indices quarterly. 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. Since 2001, data for adjustable speed drives have been included. Industrial control equipment is a $2.6 billion U.S. market.

—Control Engineering Daily News Desk
Jeanine Katzel, senior editor, jkatzel@reedbusiness.com

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