NEMA Confidence Index Up Slightly

May 2, 2003
Despite some reports from respondents to the contrary, the NEMA Electroindustry Business Confidence Index (EBCI) inched up in April 2003. The current-conditions

Despite some reports from respondents to the contrary, the NEMA Electroindustry Business Confidence Index (EBCI) inched up in April 2003.

The current-conditions index for North America brightened slightly in April compared to March. Even though the April Federal Reserve Beige Book reports weak economic conditions in most regions of the country, some factors point to a brighter outlook in the second half. Energy prices have been declining steadily since the increased uncertainty about oil supplies in the Middle East has largely dissipated. Moreover, the value of the dollar has declined significantly against the currencies of many of the nation's largest trading partners including Canada and Europe, which is helping to improve the balance of trade by expanding exports and dampening demand for imports.

The index rose to 33 for April. Still, the index level of 33 remained well below the theoretical expansion threshold of 50. An index reading above 50 indicates expansion; below 50 indicates that the manufacturing economy is generally contracting. Survey respondents noted that commercial construction remains depressed and that residential construction was losing steam.

Since June 2002, confidence in current conditions affecting the electrical industry in the Asia/Pacific region has been higher than any other region — mainly because economic growth has been substantially higher in this region. Even though it has been the best performing region in the world for almost a year, confidence regarding business conditions in the Asia/Pacific region continued to lose ground in April. While the current conditions index held steady at the threshold level of 50, the forward looking index continued to slip in April to 58 from 63 in March and 69 in February.

The outbreak of the Severe Acute Respiratory Syndrome (SARS) in China has adversely affected the Chinese economy. Some prominent forecasters have lowered expected economic growth for China by 1 to 2 percent for 2003 as a result of SARS.

Confidence in current conditions in Latin America slipped slightly to 33 in April from 31 in March even as investment in the region is picking up. The combined economies of Latin America, excluding Mexico, are expected to grow by 1 percent in 2003 and 3.7 percent next year. The Mexican econony is poised to expand by 2.6 percent in 2003 and by 4.1 percent in 2004. Investors are taking note of the fact that many Latin American countries have managed to shrug off the effect of the recession and slow recovery in the United States. Previous U.S. recessions have devastated many Latin American economies in the past.

Confidence in current conditions in Europe widened in April to 29 from 22 in March. However, like all other regions, the index remains well below the threshold indicating conditions are conducive for expansion. As in North America, now that the war in Iraq is largely over, some businesses and individuals who had put investment and spending plans on hold pending the outcome of the war are beginning to move forward.

Based on the results of a monthly survey of senior managers at member companies of the National Electrical Manufacturers Association (NEMA), Washington, D.C., the EBCI is designed to gauge the business confidence of the electroindustry in four key world regions: North America, Latin America, Europe and Asia/Pacific.