The National Electrical Manufacturers Association’s (NEMA) Electroindustry Business Confidence Index (EBCI) for current North American conditions rebounded in October following five consecutive monthly declines, despite the fact that NEMA’s Primary Industrial Controls index, which represents monthly sales, fell 2.8 percent between the second and third quarter of 2006.
As a broader measure of demand for industrial controls, the Primary Industrial Controls and Adjustable Speed Drive Index, also contracted during the third quarter of 2006, fell 1 percent from the prior quarter. However, trend growth in the broader industrial controls market remains positive given the index’s 3.2 percent gain versus the third quarter of 2005.
Despite these emerging signs of weakness, an economic recession is improbable. Instead, the U.S. economy is likely transitioning into a stage characterized by a slower, more sustainable rate of growth. This relative fall could be attributed to the declining housing industry, which helped to push overall economic growth lower in the third quarter of 2006; however, morale, at least, seems to be looking up.
While the EBCI, at 44 points, again fell short of the 50-point threshold that is indicative of sectoral expansion, these latest results suggest that the rate of deterioration in business conditions slowed appreciably during October relative to the prior month.
The North American future conditions index, a gauge of executives’ expectations for conditions six months forward, also remained below 50, but extended its rebound to a second straight month. The index rose more than nine points to 35.4 in October, and sits more than 18 points above August’s low.
Current conditions EBCIs for each of the other three world regions included in the survey all declined in October, but remained well above the critical 50-point mark. The Latin American and Europe indicators both slipped modestly to 60 and 70.8, respectively, while the Asia/Pacific index slid nearly eight points to a level of 60. The future conditions index for Latin America rose to 60.7 from 53.6 a month ago, but indicators for Europe and the Asia/Pacific region were off from a month ago at 50 and 66.7, respectively.
Even though the EBCI is rising, one thing is certain: conditions have certainly cooled down after last year’s scorching pace. EC.