How Supply Managers See High-Tech Business
Staff -- Purchasing, 2/19/2004 2:00:00 AM
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Real GDP grew at a 4% rate in Q4 2003, placing annual economic growth for the year at 3.1%. That figure splits the difference exactly between the Blue Chip consensus forecast as of December 2002 (+2.8%) and PURCHASING's own more optimistic forecast (+3.4%). However, the betting has Commerce revising the final figure upward as it gathers more data.
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The Federal Reserve changed its rhetoric in a January statement from the Federal Open Market Committee (FOMC), which sets monetary policy. While the average lay reader may find it impossible to discern a distinction between "policy accommodation can be maintained for a considerable period" (December) and "the Committee believes it can be patient in removing its policy accommodation" (January), the mere fact of a wording change was enough to convince forecasters that the Fed is planning an interest rate hike for spring.
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Purchase plans for industrial machinery are surging according to Purchasingdata.com. PURCHASING's diffusion index tracking 30-day buying plans for machinery has gained 19 points over the past six months as the percentage of buyers planning to increase purchases has more than doubled to 36%. Reasons include low interest rates, a growing conviction that the Fed will prod interest rates higher in just a few months time, imminent expiration of the depreciation provision included in last year's tax cut package, plus a healthy dose of demand growth for manufactured goods.
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Product inventories are too low, according to one in five respondents to the latest Industry Survey by the National Association of Business Economists (NABE). That suggests, according to NABE, that the accelerated pace of inventory reduction in fourth quarter 2003 was "involuntary" for many companies.
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China's getting plenty of attention as a key engine for economic growth and commodity price inflation in 2004. But some forecasters are questioning that view. Example: Morgan Stanley analyst Andy Xie (Hong Kong) believes the Chinese government will take steps to slow growth. "China is implementing policies to rein in the massive speculation in its property market, which has accounted for much of the increase in demand for commodities in this Fed cycle," Xie says.
Tracking the high-tech economy
| Indicator | Period | Latest Period | Previous Period | Year Ago | % Chg/Yr Ago |
| *Industrial production of computers + communication equipment + semiconductors. |
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| Real GDP (B'96$,SAAR) | Q4 | 10597.1 | 10493.1 | 10160.8 | 4.3 |
| Consumer spend, dur gds | Q4 | 1071.4 | 1069.1 | 963.8 | 11.2 |
| Bus investment, equip | Q4 | 929.6 | 907.7 | 853.9 | 8.9 |
| PC board book-to-bill (ratio) | Dec | 1.11 | 1.13 | 0.96 | |
| Semi equip book-to-bill (ratio) | Dec | 1.20 | 1.05 | 0.94 | |
| High-tech IP* ( '97=100) | Dec | 416.8 | 409.1 | 334.7 | 24.5 |
| Emp cost index (6/'89=100) | Q4 | 168.7 | 167.5 | 162.4 | 3.9 |
| Dur gds orders ($B, SA) | Dec | 181356 | 181444 | 166476 | 8.9 |
| Consumer conf ('85=100) | Jan | 96.8 | 91.7 | 78.8 | 22.8 |
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