EBCI Future Index Slides In April

May 12, 2006
NEMA’s Electroindustry Business Confidence Index (EBCI) for current North American business conditions held steady in the high-60 range for the third straight month in April, indicating that industry sentiment remains bullish.

NEMA’s Electroindustry Business Confidence Index (EBCI) for current North American business conditions held steady in the high-60 range for the third straight month in April, indicating that industry sentiment remains bullish. The EBCI is a monthly survey of electrical manufacturers conducted by the National Electrical Manufacturers Association (NEMA), Rosslyn, Va.

Indeed, with April’s reading of 66.7 points, the monthly index has been riding above the 50-point threshold indicating positive growth for three full years. The index for future North American conditions receded to 51.9 points, still a positive reading, but a significant decline from March’s 58.1.

The major difference in the April EBCI compared with the March reading was the degree of caution regarding future conditions in North America. While measures of Latin American, European and Asian future sentiment remained close to their month-ago levels (also at or above 60 points), the drop in the North American index for future conditions indicated some underlying uneasiness about the health of the U.S. economy down the road.

At least one panelist said he didn’t think the current level of activity could be sustained. Other comments reflected concerns that a genuine deterioration in the economy will hamper the industry. The steady drumbeat of interest rate hikes, energy and metals cost inflation, an uncertain housing market, and geopolitical tensions were all cited as potential impediments to future growth. One electrical manufacturer said, "Bookings are going gang busters. I would like to hope they can continue for the balance of the year, but I have my doubts given the continuing Fed actions on interest rates. Cost increases for commodity metals are again putting pressure on margins."

Another manufacturer said it was hard to forecast based on the huge increases for the first quarter of 2006. "The numbers just look too large," he said. "But with interest rates rising, oil and copper prices through the roof, and Iran going nuclear, things will likely slow down some before fall."