Skip to main content

Tech - looking for a bottom in the GDP data

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.

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]


2008:Q12008:Q22008:Q32008:Q42009:Q1
Information processing equipment and software0.270.30-0.16-0.92-0.69
Computers and peripheral equipment
0.100.08-0.16-0.28-0.10
Software0.160.04-0.08-0.23-0.28
Other0.000.180.08-0.42-0.31

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.
It is often said that one data point doesn't make a trend. Today's data, however, is at least a step in the right direction and it certainly fits in with the "less bad" theme that has been driving stocks ever upward over the last couple of months.

Let's hope this positive momentum can continue and that these numbers aren't revised back down when the updated GDP report is released.

Comments

Popular posts from this blog

Time to be conservative with your 401K

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...

The Trouble with Trend Reversal Indicators

Many of us use various trend reversal indicators to time our trades. Our desire is to determine when prices have changed direction so that we can ride the new trend. Why doesn't it always work out? The first reason, of course, is that unforeseen events often drive prices in unexpected directions. That is something we can't change and it often makes all of us technical traders crazy. On the other hand, sometimes an unforeseen event is a prelude to a new trend. A stock spikes up on a what seems to be a one-time piece of good fortune and soon falls back. Does it start making its way back up or does it resume a previous down trend? The conflict within trend reversal indicators is that, though they can definitely tell when prices change direction, they suffer from two problems. One, they often can't determine how significant that move in prices actually will be. Two, they are often lagging indicators. As such, they can be late in providing a signal, sometimes leading the investo...

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what...