The rebuilding effort on the Gulf Coast has already had a net positive impact on the electrical industry, according to NEMA’s Electroindustry Business Confidence Index (EBCI), a monthly survey of senior executives at member firms of the National Electrical Manufacturers Association (NEMA), Rosslyn, Va.
The September EBCI for current conditions in North America rose to 83.3 points, its highest level since April 2004. That represented a rise of nearly 17 points from the previous month’s reading. Reflecting the many questions about the longer-term repercussions of the storms, the index for future North American conditions retreated to 66.7 points from 70.4 points a month ago. A reading of 50 points or more points toward growth in the electrical market.
The impact of the Gulf Coast hurricanes seems to have sparked considerable tumult and uncertainty regarding business conditions. Said one NEMA member, “Until Katrina hit, there was an improving stability to the economy.”
The general tone of most of the forward-looking comments indicates that many of the industry’s prehurricane concerns were exacerbated by the storms. The continued tightening of monetary policy, as well as increases in materials and energy prices, were among those specifically mentioned. One respondent’s comment seems to capture prevailing sentiment: “On one hand, out of the tragedy of Katrina will come strengthened demand for all construction materials far beyond the immediate needs to get power restored. On the other hand, there is a real risk of inflation and rising interest rates dampening growth.”
Another respondent said, “Hurricane Katrina boosted current bookings levels in our utility market as the impacted utilities attempt to rebuild their electrical systems.”
Not all respondents were as optimistic. “A combination of the misdirected Fed actions on interest rates and the escalating cost of energy is keeping a lid on further economic expansion,” said one manufacturer. “Things are good, but the growth has stopped.”