IT Sales And Shipments Outpace Other Sectors

The Census Bureau says new orders for computers and related products rose 2.4% last month and shipments rose 12.5%, well ahead of the figures for durable goods from all sectors.
At least for a brief slice of time, computer makers find themselves back in front leading other industries in growing the U.S. economy. New orders for computers and related products grew 2.4% and shipments climbed 12.5% in July. "When business starts spending on capital equipment, technology will be a big part of that," says Scott Brown, chief economist at brokerage firm Raymond James & Associates. "The underlying trend is positive for moderate growth overall." Durable goods orders from all sectors inched ahead 1.0% as shipments rose 2.6% last month, according to figures released Tuesday by the Census Bureau.

Brown says he expects the computer sector will lead other manufacturers as the economy grows, but the IT sector won't return to the heights it experienced during the late 1990s, when companies purchased IT wares at unprecedented levels, investing heavily in Y2K remediation, enterprise applications, and Internet technologies. Indeed, orders for computer products peaked in July 1999 at $10.47 billion, 22% higher than the $8.16 billion posted last month; both figures are seasonally adjusted. "IT will still have a major role in overall business assessments in the overall share of manufacturing," he says. "We're seeing improvement in technology as the old-economy industries still slog along."

Brown cautions that too much shouldn't be read in one month's set of numbers. For instance, two months earlier, computer orders and shipments significantly lagged behind those of most other industries. And on an unadjusted basis, new orders and shipments fell in July by 27.3% and 18.6%, respectively.

Still, in the past year, computer orders have increased 11.4% and shipments have risen 9.8%. That compares with declines of 0.1% and 1.0% in overall durable goods orders and shipments, respectively.

A curiosity in the census report was a sharp decline in computer wares last month in unfilled orders, down 5.8%, and inventories, off 4.1%. Overall, unfilled orders and inventories dropped 0.4% and 0.9%, respectively. Those declines suggest that companies aren't using all their manufacturing capacity to produce the IT goods. "The demand for computer products," Brown says, "isn't yet generating any strains on the [IT industry's] manufacturing system."