Demand for industrial control equipment improved during the second quarter, as NEMA’s Primary Industrial Controls Index gained 2.4 percent over the first three months of 2008. The index’s first quarter reading was revised slightly upward to a 5.1 percent decline. Compared to the same period a year ago, the index registered its 19th consecutive increase, expanding 3.1 percent. A similar trend was apparent for a broader measure of industrial control demand, the Primary Industrial Controls and Adjustable Speed Drives index. That index rose 3.9 percent compared to the first quarter and 4.5 percent on a year-over-year basis.
Given the second-quarter bump in U.S. economic growth, the rebound in demand for industrial controls was not completely unexpected. Real GDP increased at a 1.9 percent annualized rate, accelerating from the lackluster 0.9 percent observed during the first quarter of this year. Rising exports and improving consumer spending were chiefly responsible for the stepped-up pace of aggregate economic activity. A sharp drawdown in inventories, which weighed on growth, likely bodes well for manufacturing output growth over the near term. Business spending on equipment and software contracted for the second consecutive quarter, but the pullback was driven by a large drop in spending on transportation equipment. Indeed, businesses ramped up spending on tech equipment and traditional capital goods, such as industrial equipment. Moreover, the credit crunch does not appear to be affecting companies’ appetites to invest in new space as nonresidential construction spending hit a new record high for the second consecutive quarter.