Strong 3Q97 for Instruments Despite Turmoil in Other Markets

While investors and economists were shaken by last October’s market plunge and bounceback, and by Asia’s ongoing economic struggles, U.S. Commerce Department data show that new orders for the aggregated “Measuring and Controlling Instruments” (SIC 382) group grew consistently stronger last year following a weak late 1996 and early 1997.

Preliminary numbers for 3Q97 show a 12.2% increase in new orders for firms in the SIC 382 category from the same period in 1996. The dollar value of shipments also improved during 3Q97. They were 10.4% higher than during the same months of 1996. This was the strongest quarter-over-quarter annual growth trend recorded for the industry in almost three years.

The uptick in new orders in recent months should ensure that final numbers for 1997 will be good. Cahner Economics (Newton, Mass.) estimates that shipments grew by approximately 7.3% last year, much better than 1996’s 2.5% increase, and well ahead of inflation. Demand should ease some during 1998 as business investment growth rates fall back from their exceptional rates of the past several years. Shipments should gain about 5% this year, about twice the rate of general inflation.

During 3Q97, overall business investment—the sum of the equipment and structures categories—expanded at an 18.7% annualized rate, even stronger than the exceptional 14.6% second quarter growth rate and much better than the 4.1% gain recorded during the first quarter of 1997.

Investment in new and renovated buildings—everything from manufacturing plants and warehouses to office buildings and shopping malls—increased at a 10.1% annualized rate during 3Q97, following an absolute decline in spending for structures during the first half of 1997. Business spending for new equipment grew at a much stronger 22.1% annualized rate for the third quarter, following a 23.0% gain during the previous three-month-period.

CONTROL ENGINEERING DATABASE UPDATE OF PRODUCTION TRENDS for 3Q97

1996(% change from prior year)
1997
1998 (projected)

Editor’s note: All data are industrial production indexes, except those marked with a “*,” which are factory shipments.Sources: Federal Reserve Board and U.S. Commerce Department.Forecasts: Cahners Economics, Newton, Mass.

END MARKETS

Chemicals
2.7
3.0
3.3

Machinery
0.1
4.7
1.5

Petroleum
1.3
3.0
2.5

Paper
-0.4
4.7
3.6

Motor vehicles
3.8
1.0
0.9

Steel
3.4
4.5
2.7

Plastics & rubber
3.4
3.1
2.2

Aircraft
9.8
21.9
4.1

Fabricated metals
3.3
1.9
1.4

PRODUCTS

Control instruments*
3.4
10.4
7.7

Computers
42.4
33.0
24.6

Electronic components
18.3
29.1
20.5

Communications equipment
1.5
7.7
3.9

Metalworking machinery
-1.3
4.2
1.9

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