The large gain in demand for industrial control equipment during the first quarter did not come as a total surprise since numerous economic indicators have displayed steady improvement over the past few quarters. For example, real GDP advanced 3.2% on an annualized basis in the first quarter, suggesting the economy continues to improve. Though that performance marked a deceleration from the fourth quarter of 2009, growth was more broad-based further making the case for a self-sustaining recovery. Even though the inventory cycle remained the largest contributor to calculated growth during the first three months of the year, just as it had in the two previous quarters, business investment has increased at a stronger-than-expected pace while consumer spending perked up to its highest rate of growth in three years.
Improving conditions in the manufacturing sector provide an even stronger backdrop for industrial controls demand going forward. Virtually all relevant indicators for the manufacturing sector have been improving since last summer, with that trend continuing during the first quarter of 2010. Industrial output increased 6.6% on an annualized basis, following strong gains in the previous two quarters, and the ISM manufacturing index has remained solidly in expansionary territory. Manufacturing capacity is slowly coming back on line as the national average factory operating rate reached 70% for the first time since late 2008. While the manufacturing sector’s recovery is still in the early stages, industry surveys point to rising optimism and data on items such as durable goods, business investment and export demand point to continued gains in output. Going forward, although the index’s robust growth observed during 2010Q1 is unlikely to be duplicated, NEMA’s Industrial Controls Index should see additional gains over the course of the 2010.
NEMA is the association of electrical and medical imaging equipment manufacturers. Founded in 1926 and headquartered near Washington, D.C., its approximately 450 member companies manufacture products used in the generation, transmission and distribution, control, and end use of electricity. These products are used in utility, industrial, commercial, institutional, and residential applications. The association’s Medical Imaging & Technology Alliance (MITA) Division represents manufacturers of cutting-edge medical diagnostic imaging equipment including MRI, CT, x-ray, and ultrasound products. Worldwide sales of NEMA-scope products exceed $120 billion. In addition to its headquarters in Rosslyn, Virginia, NEMA also has offices in Beijing and Mexico City.