How Supply Managers See High-Tech Business
By Staff -- Purchasing, 3/21/2002
- PURCHASING's Forward Demand Index, which tracks commodity buying plans for the coming three months, surged to 61 in March as buyers planning to increase their materials order volumes outnumbered buyers planning to decrease their order volumes by a factor of two to one. On the whole, this shift to a positive buying mode is a great sign for the economy. However, it should be noted that the indicator is forward looking and may be influenced more by expectations of economic growth than real evidence of it. Businesses reduced their stockpiles so drastically in the latter months of 2001 that buyers might simply be feeling a little edgy as economic forecasts for 2002 have turned decidedly upbeat in the last month or so.
- Latest contributor to the positive forecasting frenzy is a surprisingly strong upward revision to the government's fourth quarter GDP estimate from just +0.2% in the advance report to +1.4% in the preliminary. (The final data point will be issued at the end of this month). Behind the growth: a big increase in government spending, the strongest consumer spending growth figure since first quarter 2002, and reduced imports.
- Predictions of a swift economy recovery in 2002 have reached a fevered pace. A statement from the National Association of Business Economists (NABE) says, "America's longest expansion in history has been followed by one of the shortest, shallowest recessions on record." Thirty-five of NABES 37 panelists believe sustained growth will resume in first half 2002. PURCHASING's call: Don't believe the hype. Consumer spending is not sustainable at its fourth quarter rate (+6% annualized) and there's no other viable growth engine especially now that housing is tanking.
- The economy's high-tech bleed appears to be stanched. After declining for nine consecutive months (January through September of 2001), factory output among makers of computers, communications equipment and semiconductors has stabilized—even grown a little—over the past four months. While October's 0.8% gain in high-tech production might be explained by the usual pre-holiday push, January's 0.6% gain over December indicates that new orders, however meager, are now translating into new production, which suggests inventories are back where they need to be, setting the stage for a classic cyclic recovery.
- Two troubling omens from consumers: First, the Conference Board's Consumer Confidence Index (CCI, 1985=100) fell nearly four points in February after two consecutive monthly increases. Second, sales of new homes plunged nearly 15% in January while the inventory of new homes for sale rose to 4.6 months worth of supply compared to 3.8 months worth in December 2001.
| Indicator | Period | Latest Period | Previous Period | Year Ago | % chg/ Yr Ago |
| Real GDP (B'96$,SAAR) | Q4 Prelim | 9342.7 | 9310.4 | 9303.9 | 0.4 |
| Consumer spend, dur gds | Q4 Prelim | 1021.3 | 940.2 | 899.4 | 13.6 |
| Bus investment, equip | Q4 Prelim | 1006.9 | 1019.4 | 1099.3 | -8.4 |
| PC board book-to-bill (ratio) | Jan | 1.01 | 0.94 | 0.88 | - |
| Semi equip book-to-bill (ratio) | Jan | 0.81 | 0.77 | 0.80 | - |
| High-tech IP* ( '92=100) | Jan | 1005.4 | 999.5 | 1166.2 | -13.8 |
| Emp cost index (6/'89=100) | Q4 | 156.8 | 155.6 | 150.6 | 4.1 |
| Dur gds orders ($B, SA) | Jan | 179.1 | 174.5 | 199.6 | -10.3 |
| Consumer conf ('85=100) | Feb | 94.1 | 97.8 | 109.2 | -13.8 |
| * Industrial production of computers + communication equipment + semiconductors. | |||||
View All Blogs
Now Playing:
