U.S. Industrial Manufacturing Industry Cautiously Opens Wallet in First Quarter of 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--The last two years have been difficult for many companies in the Industrial Manufacturing Industry in the United States. During that time, the industry has seen spending decline steadily because of the recession, an automotive sector in disarray, the housing market collapse, and shaky financial stability. Companies have not been willing to invest capital funds until the situation in the U.S. is somewhat stabilized. Entering 2010, that will continue to ring true within the industry, as companies in most sectors are taking a very cautious approach to start the coming year.

Click on image at right for a regional breakdown of Industrial Manufacturing Industry spending in 1Q10.

It is no surprise that most companies are taking a slower-than-usual approach to spending in the early part of 2010. Bankruptcies and takeovers in industrial manufacturing have run rampant in the last two years. Production has dropped as companies either struggle to remain in operation or simply do not have anyone willing to buy their products.

The first half of 2010 will be very telling for the stability crystal ball in the U.S. If spending increases as the first half of 2010 progresses, the rebound has begun. If things remain as they have been in the last two years, 2010 will be another slow year. Currently, Industrial Info is tracking only 82 capital and maintenance projects in the Industrial Manufacturing Industry that are scheduled to begin construction in the U.S. during the first quarter of 2010 with an estimated value of $2.9 billion.

The bulk of the money associated with this spending for the quarter falls under the auspices of rail projects, a sector that has seen a significant re-emergence under the Obama administration. While the influx of rail spending is positive, the industry as a whole will be in trouble if the other sectors continue to skimp on spending.

We can expect the rail sector to increase spending through the summer and into the fall, with more projects in that sector attaining construction status as the weather becomes more favorable. However, while rail spending will be a good framework upon which to build, other sectors in the industry also need to open up their pocketbooks and invest once again.

The overall economic situation in the U.S. is showing signs improvement, which should spur more spending as 2010 progresses. Some regions continue to suffer, no matter how much the overall situation improves. The Great Lakes region currently appears to be spending more than any other region. Seventeen capital or maintenance projects worth just less than $900 million are scheduled to begin construction in January, February or March 2010. The Great Lakes region needs this spending badly.

The West Coast, with nine projects, is expected to see $636 million in spending during the quarter, ranking second among U.S. regions. The Northeast region, with 15, has the second-highest project count, and is scheduled to see $488 million worth of projects begin construction. Rounding out the top five spending regions for the first quarter of 2010 is the Rocky Mountains, with a pair of projects worth $293 million, and the Mid-Atlantic region, with 13 projects worth $249 million.

Overall, any spending is a good thing for the Industrial Manufacturing Industry. Total spending has been down these last two years, and recovery has been a long time coming. Hopefully, the first quarter will only be a taste of what is to come. As the automotive and heavy manufacturing sectors continue to stabilize, spending should improve in both, which will help lead the way to a much more promising year.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.