The Good News Is: There's No Real News - InformationWeek
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3/26/2002
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The Good News Is: There's No Real News

A leading economic indicator shows scary numbers for the computer industry, but don't panic just yet.

The Dow and Nasdaq stock exchanges bucked several days of losses and closed up on Monday, in part due to strong economic numbers released by the Commerce Department. According to a monthly report on durable goods manufacturers, the people who make products expected to last several years, such as cars and appliances, new orders increased $2.7 billion in February, or 1.5%.

But hang on a minute. Look deeper into that report, and there's some alarming numbers. New orders for computers and related products (such as storage devices and peripherals) fell 3.1%, and shipments sank 3.7%. In fact, shipments fell well into the red after posting increasing numbers for every month since September. Does this mean the computer industry is in trouble, or that IT buyers are seeing budgets shrink yet again?

Ira Silver, a visiting professor of economics at the University of Dallas, says it's hard to tell why the number of shipments dropped for the month. It could be retrenching in the industry, he says, or perhaps the five preceding months of growth simply resulted in buyers stopping for breath.

But the chances are, it's not bad news. "One month is not something to be overly concerned about," he says. "Next month, if we're down again, that would be an indication of a new trend." But Silver is optimistic that another dip won't happen. "The whole high-tech sector is really in line for a rebound," he says. "There's a lot of old equipment out there that needs to be replaced."

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