While the recession and increased revenue from abroad caused the electrical equipment manufacturing sector to drop in 2009 and 2010, it is on its way back up.
According to IBISWorld, the sector is expected to jump 5.4% in 2014 reaching $46.9 billion as industrial production and construction rates continue to increase.
“Despite improving downstream markets, industry sales have been slow to recover due to a loss of domestic market share to imports,” said IBISWorld Industry Analyst Sarah Kahn.
Import penetration has risen due to increased competition from countries with lower wages, the research company said. In response, many U.S.-based companies have offshored production operations to lower-wage countries.
As imports are estimated to satisfy 61.8% of domestic demand in 2014, compared with 40.0% in 2009, this had led to plant closures and consolidations. Consequently, the number of establishments is expected to decline at an annualized rate of 0.4% to 2,248 in 2014.
However, due to consolidations, factory closures and offshoring, overall industry profitability improved from 2009 to 2014.
A factor that will help the sector is demand for energy efficient products. “In the five years to 2019, domestic demand for industry products is forecast to increase, underpinned by rising demand for energy-efficient products and the need to replace aging electrical infrastructure,” says Kahn.
Over the same period, exports are expected to rise at an annualized rate of 9.5%, further bolstering revenue. Export growth, however, will be somewhat offset by continued import penetration, the group said. However even in the event of this potential setback, industry revenue is forecast to grow over the next five years.