Expect Busier Days Ahead for U.S. Businesses

Expect Busier Days Ahead for U.S. Businesses

Look for opportunities in computers and communications equipment.

The U.S. economic recovery is going to provide more opportunities for U.S. businesses in the second half of 2012. Consider these three reasons. First, the Purchasing Managers Index monthly figure for March rose to 53.4, making this the 32nd consecutive month of expansion in the manufacturing sector. Of the 18 manufacturing industries included in the Institute for Supply Management survey, 15 reported growth in March, indicating that the recovery is widespread.

The second reason for optimism appears in the job market. The reality is that private-sector employment has been growing at a solid pace since the January 2010 low. The 3.7% increase compares favorably to the 2.3% increase through a similar period in the 2003 to 2007 rise. There are still a lot of people unemployed, but the rate of improvement in employment is encouraging. It also means that readers should plan on higher wages later this year and in 2013 as the competition for skilled labor heats up.

The improvement in the monthly and quarterly year-over-year trends for U.S. industrial production provides the third reason to be encouraged about the second half of 2012. Improvement in the year-over-year comparisons portends a busier environment for IndustryWeek readers.

Computers and Electronics

Let's take a closer look at an important segment of the economy -- the computer and electronics industry. The computer and electronic product manufacturing index is 6.7% above this time last year. This index includes firms that manufacture computers, computer peripherals, communications equipment, similar electronic products and establishments that manufacture components for such products.

Noticeable improvement in the quarterly year-over-year trend in conjunction with positive leading indicator input portends solid activity in this industry through the coming four quarters. The year-over-year rate of growth for this industry segment tracks very well with U.S. industrial production. Our rationale for a stronger general economic environment through 2012 and into 2013 also suggests that computers and electronics production will be providing readers with more opportunities.

Computers and Electronics Production to U.S. Industrial Production

Production for the year in audiovisual equipment (a subset of computers and electronic products production) is 4.5% ahead of the year-earlier level, and the rate of rise will be increasing. The last quarter was a stellar 11.4% higher than the year-ago figure. Industry participants should plan to have adequate resources to meet the increasing demand.

Communications equipment production is not faring as well. Production for the past 12 months is 3.2% below the year-earlier level. External factors suggest that production levels will remain soft through the near term. Nondefense orders for communication equipment are tracking 14.9% below the year-ago level. Defense spending on communication equipment over the last year is worse at 29.8% below the year-ago level.

IW readers have no doubt noticed the weakness in the semiconductor industry. Global shipments in the last quarter came in 3.1% below the year-earlier level, and shipments in Asia are barely above year-ago levels. The global annual moving total has declined $3.6 billion since the mid-2011 peak, and Asian shipments are virtually flat. Look for shipments to pick up in the Americas and in Asia-Pacific later this year as the global economy improves, but expect a marginal year-over-year increase for the year as a whole.

See also:

Nearsourcing, Low-Cost Natural Gas Drive Chemical Industry Growth

Different Paths Forecast for Defense Spending, Commercial Aircraft

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