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They’ve Seen the Light: Consumer confidence hits high and EMS market sectors redistribute


According to Reuters, there's good news on The Street these days: The University of Michigan's critical U.S. consumer confidence survey for April is up at 61.9, a nice jump from March's 57.3, making this a seven month high (the highest since September 2008 before the Lehman Brother's collapse)!  While this doesn't mean that there's a similar inverse decline in job losses in the U.S., it does mean that consumers believe that the economic bottom has been reached. 

Don't expect a long line of shopper's waiting to buy though, Reuter's adds that Richard Curtin, survey director, cautioned that"while consumers believe the economy may have hit bottom, most consumers believe that when the rebound starts the economy will gain ground very slowly. [...] Consumers' financial situations remain dismal as the majority reported that their finances continued to worsen."

Inventories seem to still be managed well across most major market sectors, semiconductor included!  Manufacturing is still contracting, though at a slowing pace, according to Kathy Lien, Director of Currency Research at FX360, "the [manufacturing] sector is crawling back towards expansionary territory.  The worst may be over but it is still far to [sic] early to label this a manufacturing sector recovery because factory orders fell more than expected in March."  Regarding that critical variable, inventories, Lien added, "Inventories was the only component that declined but this is positive because lower inventories means that companies may have to restock soon."

What exactly has been happening to the electronics manufacturing sector?  Well, I've discussed the inventory, IC ASPs, and book-to-bill ratio issues in short throughout this MarketWatch Commentary section and at length in MarketWatch Quarterly over the past many quarters here.  But if we look at where growth is within the EMS sector, as reported in Manufacturing Market Insider's latest April edition, "the four segments typically identified as nontraditional [industrial, medical, automotive, defense and aerospace] together with the miscellaneous category grew faster last year than the industry overall."  See MMI's newly released chart below (from MMI Vol. 19, No. 4, p.4) for their well supported breakdown of the EMS sector:

As MMI notes, while it is not surprising that nontraditional sectors show growth over mature sectors, it is interesting to see where this growth is happening.  Taken together with other metrics, more pieces to the industry's future can then be put in place.

Lisa Ann Cairns, Ph.D.
Written on Friday, 01 May 2009 00:00 by Lisa Ann Cairns, Ph.D.

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