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Times & Trends: The New Realities of Industrial America

April 19, 2017
Here are five reasons the industrial market is ready for a rebound in 2017.

Industrial America has certainly suffered over the past two decades, with many manufacturers moving their production offshore. And there’s no question it’s tough to adjust to the fact that the industrial market just isn’t as big as it was “Back In the Good Old Days.”

But the industrial market will still provide plenty of sales opportunities for well-positioned distributors, manufacturers and reps, as you will see in this month’s feature, “Industrial Market 101.” The industrial MRO (maintenance and repair operations) and OEM (original equipment manufacturers) markets will account for an estimated 18% of all sales through electrical distributors, according to EW data. And even though electrical contractor business accounts for much more, that’s still $18.4 billion in electrical sales potential. Here are several reasons to feel good about the industrial market in the future.

#1. Even though that factory may look the same as it did 20 years ago from  the outside, inside it may be loaded with opportunities for new technology upgrades. Think about the new LED technology, IoT sensors, Wi-Fi networks and upgraded automation and building management that would pencil out for a good return on investment, not to mention all the MRO business that’s always around.

#2. Machine tool orders are on the rise. While orders for machine tools are usually very volatile on a month-to-month basis, when you smooth them out with three-month or 12-month moving averages, the data is a good leading indicator for future industrial business activity. That’s because manufacturers only buy new machine tools when they anticipate growth.

Douglas Woods, president, Association for Manufacturing Technology, McClean, VA, said in an AMT press release that the machine tool industry is heading for growth. “ We continue to be on track for an upturn later in the spring,” he said in the release. “Several large capital expansion projects have been announced in recent weeks.”

The AMT release also mentioned  “several indications of a coming upturn in orders for capital manufacturing equipment,” including “a long list of noteworthy expansion projects, including $386 million for Pratt & Whitney’s Columbus, OH, facility and Toyota’s $600 million investment in Princeton, IN.”

#3. DISC forecasts a nice comeback in the industrial market. The industrial market took its lumps over the past year to 18 months. But DISC sees some good things for the market this year.  (See “Back On Firm Footing”). Herm Isenstein, president, DISC Corp., Orange, CT,  says after a -2.1% dip in 2016, the industrial market segment should grow +6% this year.

#4. Three-month moving averages are outpacing the 12-month moving averages in the data for electrical manufacturers’ shipments and new orders for non-defense capital goods, excluding aircraft. Many stock analysts look for the occasions when a stock price’s 50-day moving average intersects with its 200-day moving average, because they see these events as leading indicators for future pricing movement. If the shorter-term moving average cross the 200-day moving average on the way up, it may indicate a time to buy, and if it crosses the line on the way down in what’s known as a “death cross” in stock circles, it may be time to sell.

Since 1Q 2015, the 3-month moving averages (MA) data for electrical manufacturers’ shipments and new orders for non-defense capital goods, excluding aircraft, have lingered in the red, But in the past few months these MAs both made their moves past their 12-month MAs and are on the upswing. New orders data moved into positive territory in January, and electrical manufacturers’ shipments appear to be headed that way.

#5. The Purchasing Managers Index is in great shape. The Purchasing Managers Index published monthly by the Institute for Supply Management, Tempe, AZ, is one of the most respected economic indicators for its read on the health of the industrial market, and since 3Q 2016, it has moved boldly well above the 50-point break-even line indicating growth.

So there you have it — at least five reasons to be cheerful when you think about the 2017 industrial market.

About the Author

Jim Lucy | Editor-in-Chief of Electrical Wholesaling and Electrical Marketing

Jim Lucy has been wandering through the electrical market for more than 40 years, most of the time as an editor for Electrical Wholesaling and Electrical Marketing newsletter, and as a contributing writer for EC&M magazine During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement.

Before becoming an editor for Electrical Wholesaling  and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted with his wife and three sons in the fertile plains of Kansas for the past 30 years. 

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