Demand for motors edged higher during the fourth quarter of 2010 as NEMA’s Motors Shipments Index (MSI) increased 1.4 percent from the previous quarter. Shipments remain appreciably lower than the levels observed during the 2006-2008 time period, but demand has trended higher over the past six quarters—climbing nearly 14 percent since mid-2009. On a year-over-year basis, shipments registered a gain of 3.9 percent versus the fourth quarter of 2009. Of the index’s two underlying categories, inflation-adjusted shipments of fractional horsepower motors posted a large year-over-year increase while the same metric for integral horsepower motors shipments declined versus 4Q 2009.
Manufacturing sector output growth slowed in the second half of 2010 and is unlikely to revert to the growth pace seen at the outset of the recovery—where production growth was driven largely by inventory rebalancing. Still, the emergence of sounder demand fundamentals should support healthy rates of growth over the near term, and during 2011 in particular, because of a strengthening economic recovery and the salutary effects of tax cuts for businesses and households.
The Motors Shipments Index is expected to register moderate gains during the next several quarters. As was mentioned above, although the broader U.S. economic recovery appears to be firming, the initial post-recession jump in demand for capital goods such as motors is likely abating. However, the backdrop for investment in motors and other industrial equipment remains solid thanks to a combination of strong corporate profitability, low short-term interest rates and balance sheets that are much improved after significant debt deleveraging. In addition, the bonus depreciation allowance that was part of the administration’s recently-passed tax cut package could also buoy demand for motors (and other big-ticket capital equipment purchases) over the near term.
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.
Brian Lego, Director, Economic Analysis