Energy and Metals Sectors Outpace Decliners to Keep North American Industrial Project Spending at 18% Growth in 2008

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Researched by Industrial Info Resources (Sugar Land, Texas)--Although Industrial Info's North American Industrial Project Spending Index reports 18.08% growth in May 2008 compared with the same month last year, spending is at its lowest point since December 2006. However, capital and maintenance spending at industrial sites remains high with $352 billion in active projects under way or scheduled to begin construction in 2008.

Click on the image at right to view a chart showing the change in the North American Industrial Project Spending Index since January 2006.

The index tracks the changes in industrial project spending growth, comparing project spending for the current calendar year compared with the previous calendar year. As can be seen in the attached chart, industrial project spending growth has, for the most part, declined every month since July 2007 when the index peaked at more than 40% growth. In general, the reduction in growth since July 2007 can be attributed in part to the cautious attitude being taken by industrial firms when it comes to capital spending in today's inconsistent market. More owners are taking a conservative approach to project spending, which is leading to more project deferrals. This is true for firms that provide raw materials to sectors experiencing a slowdown, such as those servicing the automotive or residential construction market.

The Pulp & Paper Industry with a 44% decrease and the Industrial Manufacturing Industry with a 38% drop are taking the biggest hit in 2008 in terms of project spending, especially in the heavy manufacturing, textile, consumer goods and automotive sectors. Consumers are not purchasing goods from these sectors, and plant closures and consolidation are regular occurrences. In addition, high energy prices in North America continue to marginalize plant operations across all industries, causing owners to cut back on capital spending plans. Gasoline is at an all time high in the U.S., reaching $4 per gallon, and natural gas, at more than $12 per million btu, is at a historic high level in most parts of the U.S. Energy-saving projects are a high priority.

It is not surprising that Oil & Gas Production, Petroleum Refining, Power and Alternative Fuels continue to be the leading industries for project spending in 2008. With commodity prices rising and worldwide demand for raw materials up, the Metals & Minerals Industry is also experiencing strong project spending at metal mines, coal mines, uranium mines, phosphate mines, polysilicon manufacturing plants and steel mills.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.