Purchasing Hotline

By Staff -- Purchasing, 3/22/2001

The preliminary real GDP estimate for fourth quarter 2000 was revised down to an annual rate of just 1.1% compared to 1.4% in the advance report. Good news is that virtually all of the revision is attributed to a downward change in the estimate for business inventory accumulation in fourth quarter 2000. Bottom line: With less excess inventory to liquidate, manufacturing companies can more quickly return to producing new goods.

Real GDP will grow just 2% in 2001, according to a new consensus forecast from the National Association of Business Economists (NABE). The new forecast represents a 1.4-point plunge from November's collective economic growth prediction. "The business outlook has clearly deteriorated, and NABE panelists are seeing recession risks," says Richard Berner, NABE president and chief U.S. economist at Morgan Stanley Dean Witter. "However most forecasters believe the economy will regain its footing by summer, when moderate growth will return," he adds. Eighty-six percent of the NABE panel thinks any recession occurring in 2001 would be "milder than the usual post-WWII recession" and 58% believe the ensuing expansion would be "longer than the usual post-WWII expansion" (versus 28% who say "about average" and 14% who say "shorter").

Domestic semiconductor production is expected to decelerate this year as demand and prices for standard components, such as memory chips and older microprocessors, trend downward. Analyst Wes Basel at online economic site Dismal.com observes that sales of information technology equipment to both businesses and consumers are slowing in the U.S.

Calling all economic forecasters! Turn to page 19 to see who won the 2000 Crystal Ball Economic forecasting contest and to learn about an important rule change. Entry coupon for 2001 appears on page 21 of this issue. Where to go on the Web for the relevant data releases: www.bea.doc.gov for GDP and related data; www.federalreserve.gov for industrial production, capacity utilization and interest rate data; and http://stats.bls.gov/blshome.htm for producer and consumer price indexes plus unemployment data.

Worldwide semiconductor sales will rise just 1.2% this year to $16.9 billion, says market researcher VLSI Research, reflecting a second forecast revision. Last year, VLSI had predicted 11% sales growth for 2001. Then it revised its projection down to 5%. Chip sales last year totaled $16.7 billion, up 27% from $12.1 billion in 1999.

Global sales of equipment used to make microchips almost doubled in 2000, according to the Semiconductor Equipment and Materials International (SEMI) trade association. At $48.4 billion, global sales grew 90% from the previous year. North America remained the largest market, worth $13.5 billion last year, while Taiwan displaced Japan as the world's No. 2 market. "The year-end totals confirm that 2000 was a record-buster," says SEMI president, Stanley Myers. But concern over excess capacity in the semiconductor market is leading to sharp cutbacks in 2001 equipment demand.

A recovery in demand for the machines that print circuits on semiconductors won't happen before fourth quarter 2001, suggests analyst Marisa Baldo at SG Securities. "It has become increasingly clear that current demand weakness goes beyond a simple inventory correction," she says. Applied Materials of the U.S. and ASM Lithography of Holland, two of the world's largest makers of steppers and scanners, have lowered sales forecasts to zero growth for 2001 because chipmakers are delaying expansion plans.

Worldwide Internet commerce will hit $6.8 trillion in 2004 forecasts Forrester Research of Cambridge, Mass. North America represents a majority of this B2B and B2C trade, but its dominance will fade as some Asia-Pacific and West European countries hit hypergrowth over the next two years, Forrester says.

Intel Corp. of Santa Clara, Calif., the world's largest chipmaker, has bought VxTel Inc., adding the Fremont, Calif., firm's voice-processing gear to its data-networking products. VxTel makes digital signal processors that enable communications companies to send voice and data via packet-based networks.

Intel's Pentium III will fade out of desktop personal computers by the end of the year in favor of the Pentium 4 for high-end machines and the Celeron for low-end desktops. Anand Chandrasekher, vice president of microprocessor marketing, says a new version of the Pentium III, based on the 0.13-micron manufacturing process and code-named Tualatin, will come out in the third quarter, but only for notebooks and low-end servers.

The price of high-speed Internet access looks to be heading higher. Rates have been unchanged at $40/month for the past few years, but $10 increases are in the works. Installation fees already are reaching $150 to $200 per line. Reason: Many DSL (digital subscriber line) companies are seeking buyers or are in bankruptcy court and less competition opens the door for survivors to bump up rates.