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Wednesday, October 29, 2008

Durable goods report reveals more tech weakness

The US Census Bureau just released the advance Durable Goods report for September.

It shows that the tech sector took another beating.

At a summary level of Computers and Electronic Products, Shipments were down sequentially 2.1% and New Orders were down 1.4%. This was after a terrible August number where shipments were down 5.6%; therefore, we are seeing further declines in September from an already bad number.

Looking at the sub-categories, first up we have Computers and Related Products. In this sector we see Shipments were finally up slightly at 0.8% after two bad months in a row but New Orders were down 2.1%. Given that New Orders were down 13.1% in July and up only 0.7% in August, we again have further deterioration from a prior run of bad numbers.

We have mixed results in the Communications sector where a 2.6% gain in Shipments was recorded while a big 14.6% drop in New Orders was registered.

Finally, we have Semiconductors. New Orders are not tracked in this sector but Shipments are. Back in July, Shipments grew a whopping 38.9%. Since then we have registered a drop of 18.6% in August and another drop of 13.6% in September.

Conclusion --

The tech sector is on the way to a weak fourth quarter. Now is typically when shipments and new orders start ramping up as manufacturers begin production of the consumer electronics products that are slated for holiday purchases.

Semiconductors are often seen as the leading indicators. At the heart of consumer electronics are the chips and integrated circuits. If they are not being shipped by now in increasing quantities, it suggests that manufacturers have lowered expectations for sales this holiday season. That can't be good for tech stocks.

2 comments:

Speedmaster said...

Did you see this?
http://amateureconblog.blogspot.com/2008/10/volvo-truck-sales-plunge-997.html

TradeRadarOperator said...

Yes, I saw the headline. Now that I've read it, I'm even more worried about where we go from here. Still, my signals say a near term bottom is being formed. Time will tell.

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