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2004 We're Off!
January 5, 2004 |Estimated reading time: 2 minutes
2004 We're Off! By Walt Custer January 5, 2004
The Holiday celebrations are over and now it's time to get back to business. 2003 certainly finished with positive momentum Ð improving global economic conditions, increasing electronic equipment demand and higher volumes and firmer prices throughout the electronic's food chain. Most forecasters now see 2004 as a year of broad global growth (barring some world catastrophe).
Global Economy
Based upon recent industrial production data from The Economist (Chart 1), most major countries are now in an expansion phase. The negative value for S. Korea is probably a 1-month anomaly but in general Europe, N. America, Japan and SE Asia are all growing.
Foreign Exchange
Although the global recession finally appears behind us, FOREX issues are significantly affecting global trade. The strong euro vs. the very weak US dollar (and Chinese Yuan) is key. Per Chart 2 the Yen, euro, GP pound and Canadian dollar continue to strengthen. The euro has strengthened over 40% vs. the US$ from its weakest point in mid-2001. European exported goods are currently at a decided pricing disadvantage.
In N. America the strengthening Canada $ has placed Canadian exports to the USA at a 20% cost disadvantage in just one year.
FOREX is always relative depending on whether you are an importer or exporter but the recent currency changes have been quite dramatic.
Mobile Phone Shipments Rise 32%
Dramatically improved mobile phone demand made 2003 headlines. Based upon IDC's most recent estimates cell phone shipments grew 32% globally from 2002 to 2003 (Chart3). Embedded camera and 3G technologies coupled with accelerating developing country demand produced global growth well beyond any mid 2003 projections. Component shortages and shifting supplier market shares (more phones supplied by Asian companies) are key current news topics.
But . . . What happened in November?
In the USA electronic equipment demand has been expanding significantly since late 2002. Beginning in late summer 2003 communications equipment (primarily datacom) growth accelerated, exceeding the expansion rate of the 2000 bubble year. However after double digit communications equipment growth from August to October 2003, orders plummeted in November driving total US electronic equipment bookings down sharply (Chart 4).
Hopefully the "November 2003 U.S. communications equipment order plunge" was just a 1-month correction for excessive bookings in September and October and that growth will resume soon. With a solid economic recovery underway I am betting that the electronic equipment expansion will continue.
Wrapping Up
Chart 5 summarizes the 12/12 (annualized) and 3/12 (3-months in 2003 vs. same 3-months in 2002) growth rates for the U.S. electronics food chain. In spite of the November communications plunge, on a 3/12 basis all component and end market sectors are in positive territory.
Happy New Year. 2004 should be fun.
Walt Custerhttp://www.custerconsulting.com E-mail: walt@custerconsulting.com