While current business conditions in the electrical market remain solid, some electrical manufacturers are less optimistic about the future.
According to the Electroindustry Business Confidence Index (EBCI), a monthly survey of senior executives at member firms of the National Electrical Manufacturers Association (NEMA), Rosslyn, Va., current conditions in North America retreated in October from the previous month’s near-record high of 83.3 points, but remained strongly positive at 71.7 points. October marked the 30th consecutive month the index has topped the 50-point threshold indicative of growth in the industry. While that reading still points to continued industry expansion, the breadth of sentiment is at its lowest ebb since 2001. A reading of 50 points or more points toward growth in the electrical market.
Confidence in both current and future conditions across the other three world regions included in the survey all reached or exceeded the 50-point growth threshold in October for the third straight month. The current conditions index for the Asia/Pacific region slipped modestly from September, while readings for both Latin America and Europe posted solid gains.
The impact of September’s Gulf Coast hurricanes continues to reverberate throughout the industry, but manufacturers’ opinions on how the storms are affecting the electrical market are mixed. Said one NEMA respondent, “For the past several weeks we’ve seen sustained improvement in incoming orders across a broad range of products and markets. Some is Katrina/Rita rebuild-related, but certainly not all.
One manufacturer said incoming orders are still very strong with lots of activity due to the storms, but another NEMA member was concerned the current surge of activity may be taking away from future sales. A respondent said, “Between hurricanes and commodity pricing, the world seems to be on hold.
Another manufacturer said the hurricanes have “thrown the markets into some disarray, with significant demand for many different types of cable. Crews moving from other parts of the country to carry out recovery work have caused other projects to be put on hold,” said the respondent. “Overall the market effect is positive, despite shortages of different manufacturing compounds.
Some NEMA members appear increasingly concerned that increasing interest rates, energy prices, commodity scarcity and consumer skittishness will emerge as a significant drag on the industry in 2006, while others were cautiously optimistic about next year, despite the expected decline in the housing market. Said one respondent, “Business continues to be very strong and growing despite oil prices, Fed actions, Katrina, etc. However, we see a lot of clouds on the horizon and some are quite dark.
Concerns over commodity pricing and PVC shortages were a common theme. Said one member, “It will be interesting to see how the continued increase in commodity pricing and shortage of some compounds will affect the market as a whole.”