Electrical Marketing's Leading Economic Indicators

May 28, 2009
As you can see in the following leading indicators, the U.S. economy may at long last be showing some signs of life

As you can see in the following leading indicators, the U.S. economy may at long last be showing some signs of life. But don’t book that vacation to the Bahamas just yet — the electrical market usually lags the overall economy by at least a few quarters.

Purchasing Managers Index (PMI) still negative in April but declines are moderating. With a 3.8-point increase from March to 40.1 points, the PMI is still negative and well below the 50-point level that signifies growth in manufacturing activity. But Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee, likes what he sees. “The decline in the manufacturing sector continues to moderate,” he said. “After six consecutive months below the 40-percent mark, the PMI, driven by the New Orders Index at 47.2 percent, shows a significant improvement. But the Customers’ Inventories Index indicates that channels are paring inventories to acceptable levels after reporting inventories as ‘too high’ for eight consecutive months. The prices manufacturers pay for their goods and services continue to decline; however, copper prices have bottomed and are now starting to rise. This is definitely a good start for the second quarter.”

Building permits pick up in April. With a 3.3 percent increase over March, building permits saw a nice bump. But at a seasonally adjusted annual rate of 494,000 permits, they are still 50.2 percent below the revised April 2008 estimate of 991,000. The National Association of Home Builders (NAHB) said permits for single- and multi-family units were down in all but the West, which reported no change (single-family and multi-family combined) for April.

Consumers feeling bullish. The Conference Board Consumer Confidence Index which had improved considerably in April, posted another large gain in May. The Index now stands at 54.9 points, up from 40.8 in April. Said Lynn Franco, director of The Conference Board Consumer Research Center, “After two months of significant improvements, the Consumer Confidence Index is now at its highest level in eight months. While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”