How Supply Managers See High-Tech Business
Staff -- Purchasing, 4/18/2002
- Comfort shopping? Corporate earnings and profitability remain so dismal relative to recent years that many forecasters believe business leaders will continue to emphasize cost cutting rather than investment spending through most of this year. Consumers, however, are acting like there's no tomorrow. Consumer confidence leapt 15 points in March alone, and spending was on pace for a 3%-4% gain in first quarter 2002. Economists say this spending spree must continue if the recovery is to be sustained this year. Biggest risks: Soaring gasoline prices. Rising mortgage rates. Signs in some metro areas that home-price bubbles are bursting.
- Economists' panel votes down "double dip" scenario. Three quarters of business economists say the chances for a double dip recession are less than 50-50, according to the March 2002 Economic Policy survey conducted by the National Association of Business Economists (NABE). Fourteen percent put the double-dip odds at 50-50 and only 9% think the chances of it happening exceed 50-50. Top-ranked concern going forward: Excessive indebtedness of consumers and businesses.
- Consensus economic growth forecast jumped half a point in March 2002, according to the latest Blue Chip Economic Indicators. "Recent data has left economists scrambling to raise their forecasts of GDP growth in the first half of this year," Blue Chip remarks, noting that "a sizeable number of analysts have begun to speculate that a substantial reduction in the pace of inventory liquidation could propel GDP growth in Q1 to 4%, the best performance since the spring quarter of 2000."
- While the consensus GDP forecast for 2002 has risen to 2%, forecasting outfits like Merrill Lynch (ML) are now calling for a "roaring recovery" on the order of 3%-4%. Reasons: $90 billion in federal spending (expected to add up to half a point to GDP growth), $70 billion in tax cuts (expected to fuel consumers' spectacular spending spree and to revive business spending), and expected inventory restocking activity (expected to add 1.5 percentage points to GDP growth). Note: ML is taking a somewhat contrarian view point on corporate earnings, suggesting that a strong near term rally combined with tax breaks will lead to much stronger capital spending as well.
- Get ready for PURCHASING's annual Crystal Ball Economic Forecasting Contest. 2001 winners will be announced in the May 2 issue of PURCHASING Magazine. To enter the 2002 contest, go to www.purchasing.com/crytalball. Deadline for entries is June 30, 2002. Cash prizes: $500 for best score, $150 for second place, $100 for third place. Previous money winners can participate, but may not collect prize money.
| Indicator | Period | Latest Period | Previous Period | Year Ago | % Chg/ Yr Ago |
| Real GDP (B'96$,SAAR) | Q4 Final | 9348.6 | 9310.4 | 9303.9 | 0.5 |
| Consumer spend, dur gds | Q4 Final | 1021.7 | 940.2 | 899.4 | 13.6 |
| Bus investment, equip | Q4 Final | 1005.6 | 1019.4 | 1099.3 | -8.5 |
| PC board book-to-bill (ratio) | Feb | 1.00 | 1.01 | 0.79 | - |
| Semi equip book-to-bill (ratio) | Feb | 0.87 | 0.81 | 0.71 | - |
| High-tech IP* ( '92=100) | Feb | 1034.9 | 1022.3 | 1146.7 | -9.7 |
| Emp cost index (6/'89=100) | Q4 | 156.7 | 155.3 | 150.6 | 4.1 |
| Dur gds orders ($B, SA) | Feb | 179.4 | 176.7 | 190.3 | -5.7 |
| Consumer conf ('85=100) | Mar | 110.2 | 95.0 | 116.9 | -5.7 |
| * Industrial production of computers + communication equipment + semiconductors. | |||||
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