Electronic Factory Orders Up


U.S. factories increased their June electronic shipments 0.5 percent above the May level, which was revised higher than initially reported. This slightly underestimates the change in unit volume with electronic product prices continuing to decline 2 percent plus a year. The sales pace has strengthened since the weak sales period earlier in the year and is comfortably on track to hit our 10 percent to 12 percent growth forecast for 2005.

Electronic orders soared 8.6 percent in June from May with outsize gains for computers, telecom and instruments. While most of this huge change is probably randomness or measurement error, enough of it is real to confirm that market trends have clearly improved. Similar order surges have occurred in several electronics end markets in the last two months.

U.S. electronic manufacturers increased their order backlog 1.8 percent in June and kept their inventories steady, so they are set for steady to slightly rising production and sales for the next few months.

The clearing out of surplus inventory with aggressive discounting by the motor vehicle industry in June and July prevents a drop in their electronics orders this summer, but it does not mean an increase in motor vehicle sales volume this year compared with 2004.

James Haughey is director of economics at Reed Business Information, the parent company of Electronic News.

Originally appeared at Electronic News www.electronicnews.com

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