Demand for industrial controls increased modestly during the third quarter of 2009, with NEMA’s Primary Industrial Controls Index rising 1.6 percent versus the April-to-June period. While this represented the first quarter-to-quarter gain since the second quarter of 2008 for the index, published by the National Electrical Manufacturers Association (NEMA), Rosslyn, Va., shipments remain at a very low level, with the index still more than 30 percent below the third quarter of 2008. A broader measure of industrial controls demand, the Primary Industrial Controls and Adjustable Speed Drives Index, posted a 0.9 percent increase over the second quarter of 2009, but also continues to reflect lackluster demand with a 29.5 percent decline on a year-over-year basis.
The manufacturing sector, which experienced its deepest contraction in output since the Great Depression, has seen conditions improve over the past several months. NEMA said businesses continue to liquidate inventories, but believes that process is coming to an end. Also, orders for durable goods have started to trend higher and the capacity utilization rate reached its highest point since the end of 2008. A NEMA press statement said, “Auto production accounts for a sizable chunk of this rebound in manufacturing indicators, as automakers have restarted production lines that were shut down or dramatically cut back during the summer and in some instances have raised production targets for the next few quarters. Nonetheless, even when one excludes the boost caused by the jump in auto production, other manufacturing industries are contributing to the gains in industrial output.”
NEMA also said in the release that a turn in the inventory cycle is providing a boost to production and will continue to do so into early 2010. Beyond that point, NEMA believes the manufacturing sector’s recovery will fade and place some downward pressure on demand for industrial controls. With the national average capacity utilization rate still in the upper-60 percent range, a near-record amount of productive capacity is still not in use and this will keep a lid on replacement demand for industrial equipment and machinery.