Motors Shipments Index declined during the second quarter of 2009

Source: PlantServices.com

Oct 01, 2009

NEMA’s Motors Shipments Index declined for the third quarter in a row during the second quarter of 2009, contracting 10.5% compared to the first three months of this year and nearly 25% versus the second quarter of 2008. After climbing sharply to a cyclical peak in 2006 and remaining at a high level through mid-2008, the index has plunged 28% in the past nine months and is now at its lowest level since the beginning of 2005. Demand for both fractional and integral horsepower motors weakened, with both categories registered large year-over-year declines in shipments.

Recent data suggest the U.S. economy is likely close to emerging from the deepest recession of the post-WWII era. Unfortunately, given that the recession was caused largely by a financial crisis, the process of economic recovery will be a slow one as it will take time for households and businesses to work off what were unsustainable levels of debt. While segments of the U.S. economy such as homebuilding and consumer spending are showing signs of stabilization (albeit at low levels), others such as nonresidential construction activity and the labor market are either worsening or are not showing any signs of measurable improvement.

Manufacturers have felt the full force of the recession. Indeed, total industrial output has plunged 17.5% since December 2007, making this the steepest contraction in manufacturing activity since the Great Depression. Second quarter data showed that businesses aggressively liquidated inventories yet again as firms continue to adjust stockpiles to line up with a lower level of final demand. Signs of an impending rebound in production are mounting. For one, auto plants that have been idled due to lackluster sales are scheduled to re-start production. In addition, new orders for durable goods (excluding defense and aircraft) have crept higher over the past couple of months.

Nonetheless, once the recovery in manufacturing activity begins, it will likely be modest for several reasons. Businesses continue to hold the line on large-scale capital spending outlays as they try to restore profitability. Replacement demand for industrial equipment and machinery, such as motors, will be weak even once production activity resumes since a record share of operable capacity is currently not in use. As a result, NEMA/BIS expects the Motors Shipments Index will decline through the end of this year before it beginning what should be a tepid rebound.

For more information, visit www.nema.org.

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