NEMA Says Gulf Coast Rebuilding May Boost Industry Sales

A report from the National Electrical Manufacturers Association (NEMA), Rosslyn, Va., said although the damage from Hurricane Katrina is catastrophic, the electrical industry can expect to benefit from the massive reconstruction efforts.

Many suppliers of power equipment reporting strong demand are already worrying about keeping up with this growing demand in the short term. Electrical manufacturers that utilize petrochemicals such as resin are also facing shortages of input materials that are making it difficult to ramp up production to meet the boost in demand related to hurricane damage to structures. But the electrical industry can expect that strong replacement demand for housing and commercial and industrial structures will increase demand for building equipment and power equipment manufacturers for the remainder of this year and much of next year. Nonetheless, the surge in demand will come at a price. Rising building materials and energy costs will detract from potential gains.

The economic impact of the storms on industrial drivers for the electrical industry will likely be mixed. Reduced demand elsewhere resulting from higher energy costs and a shift in government and private sector resources to the Gulf region will be offset to some degree by replacement demand in that region for storm damaged appliances, automobiles, and capital equipment. The sudden increase in demand for electrical products is to a large extent transitory and that the long term outlook, while positive, is not quite as good as the near term conditions might suggest.