Industry News
Lighting Systems Index Falls Sharply During the Third Quarter
November 16, 2008
NEMA’s Lighting Systems Index contracted 4.3 percent in the third quarter of 2008 compared to the second quarter. Although the index’s performance has been uneven over the past several quarters, the overall trend has been negative as the index fell 7.5 percent on a year-ago basis and has declined nearly 12 percent on a cumulative basis since the beginning of 2006. Domestic shipments dropped for all five lighting equipment segments, with large lamps posting the largest year-over-year decline.
Lighting equipment demand continues to take a significant hit from the residential market. Despite signs that a bottom might be forming in the level of existing and new home sales, construction activity continues to face headwinds on the supply and demand side. On the supply side, builders are loath to begin new homes as many local markets are bloated with inventories caused by record foreclosure rates. On the demand side, a weaker economy is prompting a pullback in household growth and creating a disincentive for consumers to make major purchases such as a new home. Moreover, lenders have reined in standards for loans, which will also reduce the ability of consumers to buy a new home. Even consumer purchases of energy-efficient lighting equipment such as CFLs has taken a hit as of late, as buyers have balked at their higher first-cost pricing.
The nonresidential market has acted as an offset to the blow to demand caused by the sharp drop off in demand from the residential sector. Unfortunately, that source of support is beginning to wane as inflation-adjusted outlays on commercial and industrial construction projects declined during the third quarter of 2008, marking the first such drop since 2005. Five consecutive quarters of shrinking corporate profits, slow-to-thaw credit markets and tougher lending terms have eroded the prospects for construction activity going forward, and thus will lead to diminished demand for lighting equipment.
NEMA is the trade association of choice for the electrical manufacturing industry. Founded in 1926 and headquartered near Washington, D.C., its approximately 450 member companies manufacture products used in the generation, transmission and distribution, control, and end-use of electricity. These products are used in utility, medical imaging, industrial, commercial, institutional, and residential applications. Domestic production of electrical products sold worldwide exceeds $120 billion. In addition to its headquarters in Rosslyn, Virginia, NEMA also has offices in Beijing, São Paulo, and Mexico City.
