IT Production Increases Slightly In July

IT manufacturers saw a slight increase in production last month, but some economic indicators suggest that American computer makers aren't producing wares at levels they have in the past. Still, manufacturers of computers and peripheral equipment continue to outperform the overall manufacturing sector.

The value of computers and peripheral equipment rose 1.9% in July; by comparison, overall industrial production inched ahead 0.4% last month, according to a report issued Tuesday by the Federal Reserve Board. IT production grew 24.8% when July 2004 stats are compared with those from July 2003. But those IT production numbers can be viewed from different perspectives. For instance, the Fed revised its second-quarter IT production figures, which show a 20.4% annual increase; that's down from 28.1% in the first quarter and 27.2% in the final quarter of 2003.

Meanwhile, factories producing IT wares worked at 76.3% of capacity, up a tenth of a percentage point from June--but slightly lower than April's level. Plus, capacity utilization is nearly 2 percentage points lower than the average level for the past 30 years--and it's 10 percentage points below the high it reached prior to the boom years of the late '90s.

One independent economist, though, doesn't see the numbers as meaning that the IT economy isn't humming along as it should. Bruce Kratofil suggests that capacity utilization isn't as strong as in the past because more IT products sold in the United States are being produced overseas than they were a decade ago. Also, he says, the value of IT products produced could have more muscle behind them than those produced earlier--in other words, purchasers get more punch from their PCs, for instance, at the same price they paid for them years ago.

Still, American IT manufacturers have plenty of capacity that they hope to soon use.