It is amazing how quickly people's view of the economy can change. By some accounts, we have gone from plunging off the fiscal cliff at the beginning of the year to now scaling the dizzying heights of the stock market. It would seem many people have a "nothing but blue sky" mentality, and that is not a good thing. This has unfortunately led to some overly optimistic views about 2013 and 2014. While we share the near-term positive outlook, we believe a nuanced outlook on the opportunities and challenges beyond 2013 will be the best guidance to success in tomorrow's economy.
See Also: Global Manufacturing Economy Trends & Analysis
The stock market, retail sales, housing construction and nonresidential construction are all performing well and the continued stimulative monetary policy is helping boost this trend. However, based on internal trends of sector activity and the inevitability of market corrections, the good times will not last forever. Changes in regulation, taxation and trends in economic indicators such as corporate bond prices indicate that our anticipated change in consumer behavior in 2014 will catch many businesses unprepared and with too much inventory.
New orders of computer and electronics new are in the recessionary phase of the business cycle. New orders are at $258.4 billion (annual basis), a level 0.9% below last year. We forecast 2013 and 2014 will bring more of the same as the new orders trend continues to move lower. Look for new orders in 2013 to end the year 3.5% below 2012. Expect 2014 will be even more challenging with new orders falling almost 10% below the 2013 level.
Computer & Electronics Production Mirrors U.S. Industrial Production
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Computers and electronics production, which includes computers, computer peripherals, communications equipment and similar electronic products, has fared better with activity now 5.8% above the year-ago level. The rate-of-change has entered the slower growth phase of the business cycle, but we expect the growth in manufacturing to continue.
