Process Automation Market Recovery in 2011 and Beyond

Promising signs continue to point toward a sustained process automation market recovery to continue through 2011 according to analysts at ARC Advisory Group (www.arcweb.com). During 2010, the automation market was at the point where suppliers serving the installed base with MRO activities fared better than those relying heavily on project business. Suppliers ate through a huge chunk of their project backlog and finished product inventory while new projects were postponed or canceled during the recession. Also, shipments for many new project orders received during 2010 were delayed until 2011. 

ARC expects the tepid growth seen during 2010 to accelerate in 2011, but remains skeptical about the process automation market reaching pre-recession growth levels. Historically, the process automation market has been characterized by slow yet steady growth, and analysts expect the market will return to this pattern with an overall CAGR of roughly 6% over the five-year period of 2009-2014.  "Suppliers with quick access to raw materials and components and an efficient supply chain to enable quick ramp-up of production and inventory will be in the best position to participate in the increase in demand," according to senior analyst David Clayton, principle author of ARC's "Automation Expenditures for Process Industries Worldwide Outlook."

Purchasing managers' indexes (PMIs) provide a good barometer of overall health in the manufacturing and automation markets. PMIs typically include data, such as production level, new orders, supplier deliveries, inventories and employment level. A PMI reading below 50 indicates a general contraction in the manufacturing economy being measured, while any reading over 50 indicates expansion. The J.P. Morgan global manufacturing PMI edged up to 57.8 from 57.1 in January, marking the second-fastest reading ever in the global gauge, which is based on other surveys covering over 7500 purchasing managers in nearly 30 countries.  Output and new order components accelerated, and the input price gauge rose to 76.7 from 73.3 in January. The U.S. ISM represents 28.6% of the gauge, followed by Japan at 12.3%, China at 7.4%, Germany at 5% and the U.K. at 4.2%.

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