Industrial controls indices highlight robust market conditions


Jul 12, 2006

The National Electrical Manufacturers Association’s (NEMA) Primary Industrial Controls Index increased 6.1% between 2005’s fourth quarter (4Q05) and 2006’s first quarter (1Q06). This marks the index’s 10th consecutive quarter of year-over-year growth, and constitutes its highest reading since the first quarter of 2001.

At the same time, NEMA’s Primary Industrial Controls and Adjustable Speed Drive Index reached a new all-time high for its five-year history. This broader index, which includes adjustable speed drives, posted a 5.8% quarter-to-quarter growth rate during 1Q06.

“While part of this growth reflects a typical seasonal demand growth, market conditions for industrial automation and controls equipment clearly remain strong because sales jumped more than 12% compared to the same period a year ago,” says Brian Lego, NEMA's economic analysis director.

NEMA reports the near-term outlook for the U.S. manufacturing sector bodes well for industrial controls and adjustable speed drives. Capacity utilization rates continue to edge higher in many industries, and output originating from non-high-tech manufacturing industries remains robust. In particular, business investment likely will push manufacturing activity even higher during the rest of 2006. For instance, the degree to which capital spending on traditional goods, such as industrial controls, was depressed during the economic downturn, now suggests the recent brisk pace of investment will continue as companies replace old, worn-out equipment. More importantly, however, recent pushes to profitability have left some companies with added cash, and some surveys indicate an increasing willingness by managers to use these profits in an effort to expand capacity and invest in new equipment.