The Bureau of Economic Analysis today released the advanced report on GDP for the first quarter on 2009. The headline number came in at -6.1%, significantly worse than expected. The stock market, however, rallied on the news.
Two factors were looked at as positives. Consumer spending was up a surprising 2.2% where another drop had been expected and inventories saw a large decline. With spending up and inventories down, investors are hoping that manufacturing can finally begin to ramp up again.
Based on the data in this table it does appear that tech just might be out of the woods. Here's why:
Let's hope this positive momentum can continue and that these numbers aren't revised back down when the updated GDP report is released.
Two factors were looked at as positives. Consumer spending was up a surprising 2.2% where another drop had been expected and inventories saw a large decline. With spending up and inventories down, investors are hoping that manufacturing can finally begin to ramp up again.
What about the tech sector?
The GDP data is presented in a set of tables and a few of them break out the numbers by sector. The chart below is taken from one of these tables. Note that the Information processing equipment and software category is the summary line for the whole table.Extract from Table 2.--Contributions to Percent Change in Real Gross Domestic Product
[Quarters seasonally adjusted at annual rates]
[Quarters seasonally adjusted at annual rates]
| 2008:Q1 | 2008:Q2 | 2008:Q3 | 2008:Q4 | 2009:Q1 | |
|---|---|---|---|---|---|
| Information processing equipment and software | 0.27 | 0.30 | -0.16 | -0.92 | -0.69 |
Computers and peripheral equipment | 0.10 | 0.08 | -0.16 | -0.28 | -0.10 |
| Software | 0.16 | 0.04 | -0.08 | -0.23 | -0.28 |
| Other | 0.00 | 0.18 | 0.08 | -0.42 | -0.31 |
Based on the data in this table it does appear that tech just might be out of the woods. Here's why:
- 2008:Q3 was bad and 2008:Q4 was much worse. Q4 was so bad, in fact, that at this point it does look like the bottom.
- At the summary level, the 2009:Q1 data does show an improvement.
- At the sub-sector level, two out three are showing marked improvement, especially Computers and peripheral equipment; ie, hardware looks to be on the mend.
- The Software sub-sector shows another decline but it's a small decline, much less than that seen in the prior quarter.
Let's hope this positive momentum can continue and that these numbers aren't revised back down when the updated GDP report is released.
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