Motors shipments decline sharply to close out 2007
NEMA ’s Motors Shipments Index contracted 7.3% quarter-to-quarter during the last three-month period of 2007. On a year-over-year basis, the index fell nearly 7% and has slipped in four of the last five quarters. Over the full calendar year, the index declined 3.5% after posting two consecutive years of double-digit growth. The index’s recent weakness stems largely from a precipitous decline in fractional horsepower motor shipments, a decline likely related to the U.S. housing market’s recession. By contrast, demand for integral horsepower motors has remained strong throughout the recent slippages in the top-line index.
Fears of an impending recession have been stoked by a host of negative economic data in recent weeks. For example, the fourth quarter 2007 reading on real GDP showed the U.S. economy expanded at a mere 0.6% rate, the weakest performance since 2002. The ISM nonmanufacturing index showed the services side of the economy contracted in January, marking the first decline in service sector business activity in more than five years. In addition, indicators suggest no improvement any time soon in the housing market as construction activity continues to plummet, prices decline and foreclosures mount. On a more positive note, the manufacturing sector, notwithstanding a slump in fourth quarter output, has held fairly steady.
The industrial sector is expected to register steady growth going forward, thanks to export demand and to a lesser extent business investment and inventory replenishment. As a result, demand for integral horsepower motors is expected to support the overall index. Unfortunately, further declines in the index are likely as NEMA/BIS anticipates conditions underlying the fractional horsepower segment will worsen.