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(ROSSLYN, Va.)—NEMA’s Motors Shipments Index (MSI) increased 6.1 percent during the fourth quarter of 2009, marking the second consecutive gain for the index. Nonetheless, demand for motors remains weak compared to its performance of recent years, as the MSI is still 5.7 percent below the level posted in 2008Q4. Inflation- and seasonally-adjusted shipments of fractional horsepower motors rose for the third consecutive quarter, while integral horsepower motors saw only their second increase in the past seven quarters.

The U.S. economy appeared to gain some momentum during the fourth quarter of 2009, expanding at a 5.9 percent annualized rate to finish the year. However, the underlying components driving growth do not portray a broad-based recovery. Inventories accounted for a sizable chunk of calculated growth in real GDP during 2009Q4 and the current turn in the inventory cycle is not expected to last beyond the next couple of quarters. One surprising result from the Q4 GDP release was a stronger-than-expected gain in business investment spending on equipment and software, suggesting that companies are beginning to show some confidence in near-term economic prospects.

At this time, the recent turn in the inventory cycle along with surging exports are supporting most of the rebound in manufacturing activity. However, this is more of a temporary boost and the sector’s prospects for recovery will hinge on increased export demand continuing as well as capital spending exhibiting signs of sustained growth. The recent upturn in output will generate replacement demand for motors and other equipment used to drive production processes in manufacturing plants. With the national average capacity utilization rate remaining well below long-term historical norms, this boost will be somewhat limited until a larger share of productive manufacturing capacity comes back on line. Consequently, NEMA’s Motors Shipments Index will likely see modest gains on balance during 2010.

Contact

Brian Lego, Director, Economic Analysis

bri_lego@nema.org