The NEMA Electroindustry Business Confidence Index (EBCI) had a less optimistic tone in February, but some manufacturers attributed that to the impact that January’s foul weather had on business conditions.
Said one respondent in the EBCI, a monthly survey of senior managers at members of the National Electrical Manufacturers Association (NEMA), Rosslyn, Va., “February has been noticeably softer than January. Hopefully, it’s more of a weather-related phenomenon than anything else. Trade inventories continue to be very low.”
Another manufacturer’s business was looking quite good so far this year.
“We continue to experience strong volumes on both the residential and commercial sides of our business,” said the respondent. “If the Fed leaves rates alone, this is shaping up as an excellent year.”
However, the volatile pricing situation with steel and copper was cause for concern for several survey respondents.
Said one electrical manufacturer, “Copper and other commodities running up so strongly has created a chaotic situation in the market place where it is very difficult to ascertain what is demand and what is simply buying because it will be more expensive tomorrow.”
Although the EBCI’s Current Conditions indexes for all four regions remained at or above 50 (suggesting conditions appropriate to industry expansion), all four indexes lost some breadth of confidence, and the current index for Europe slipped seven points to 50 points, the threshold value above which conditions are favorable to industry growth. The North America, Latin America, and Asia/Pacific indexes all narrowed by between one and three points compared to January, measuring 72, 62 and 72 points, respectively, in February.
The future conditions picture is a bit more complex. February’s results mark the eighth consecutive month in which all four regional indexes remained above 50. However, this month saw some divergence in the paths taken by the individual indexes. North America and Europe remained essentially flat, losing or gaining less than one point to 89 and 71, respectively. Confidence in Latin America’s future business conditions, which has been on something of a roller coaster ride for the past year, contracted by about nine points to 76. The breadth of confidence in the Asia/Pacific region narrowed by 20 points to just under 67 in February for the second largest month-to-month change on record for that index.
Expectations for business six months from now were mixed. One manufacturer said although things are currently good for his company, he saw no drivers for further strengthening and was concerned about future risks such as Fed rate increases.
Still, there seemed to be an undercurrent of optimism that business conditions are improving. Said one manufacturer, “Most of the forecasts for the economic indicators that we track are quite positive. If the indicators have not somehow become ‘de-linked’ to the electrical industry, then 2004 should be the first year of positive market growth since 2000.”