Robust industrial growth continues, says NEMA after 3Q05

By Control Engineering Staff November 16, 2005

Third-quarter numbers from NEMA indicate a ‘period of increasingly robust growth for an industry that was hit hard by the protracted weakness in U.S. manufacturing activity,’ according to Brian Lego, NEMA’s director, economic analysis. Sales of industrial control products and systems, as measured in NEMA’s Primary Industrial Controls Index, increased 3% during third-quarter 2005. Compared to the same period a year ago, the index jumped by 5.5%. With its eighth consecutive quarterly-gain, NEMA’s Primary Industrial Controls Index is now 24% above the market’s recessionary low point.

Primary Industrial Control and Adjustable Speed Drive Index gained 4.2% between second and third quarters of 2005. In addition, sales growth accelerated for this market segment, as the index posted a 9.6% gain when compared to third-quarter 2004. ‘The most recent quarter’s reading nearly eclipsed the index’s all-time high and represents a 27% increase in overall sales since the close of 2002,’ says Lego.

While not having much of an impact on either index up to this point, rising short-term interest rates will likely pose somewhat of a downside risk for industrial automation and control equipment, NEMA says. For example, only 18 months ago the yield on 3-month Treasury bills was below 1%, but has since increased by more than 300 basis points to 3.9%. With the U.S. Federal Reserve expected to continue raising the benchmark federal funds rate until next year, the interest rate environment should dampen growth.

Manufacturing activity is expected to remain a positive driver for industrial controls demand, NEMA says; the factory-operating rate increased to its highest point in five years during third-quarter 2005, and total manufacturing output has been on the rise in the last nine quarters. Certain industries expect capacity additions. Moreover, the manufacturing sector is expected to see a re-acceleration in output during 2006 as hurricane-related rebuilding in the Gulf Coast begins in earnest.

Healthy demand for industrial machinery and equipment has bolstered demand for industrial automation systems. After an unexpectedly weak second quarter, in which real business investment in industrial equipment declined measurably, this measure jumped more than 20% in the third quarter, marking the largest one-quarter jump in over a decade, the organization says. ‘There was a pullback in industrial machinery production during the third quarter, but this is expected to be temporary,’ says Lego. ‘Indeed, output growth is expected to average more than 6%during until late 2007 as domestic companies, many of which are seeing profits soar, replace old equipment or expand capacity.’

For last-quarter’s results as reported in Control Engineering , click here :

—Mark T. Hoske, editor-in-chief, Control Engineering,