Jan 28, 2004 (08:01 AM EST)
Computer Shipments Fall Again

Read the Original Article at InformationWeek

Shipments of computers and related products fell in December for the second straight month, slipping 1.3% after dropping 2.4% in November, the Commerce Department reported Wednesday. Shipments for all types of durable goods--manufactured items designed to last three or more years--rose 0.6% in December and 0.3% in November. All figures are seasonally adjusted.

New orders for computer wares last month increased by 2.0%, following an 0.1% rise in November and an 0.8% dip in October. Inventories also rose in December by 2.7%, a sign that manufacturers aren't moving wares as quickly. Overall, durable-goods inventories inched forward by 0.2% in December.

In the broader computers and electronic products category, which includes communications equipment and semiconductors, new orders fell by 2.7%, the largest of any major grouping. Orders for communications equipment fell by $900 million, or 18.1%, the lowest level it's been at since December 1996.

Despite the mixed news, economist Lakshman Achuthan is bullish about the economy, including the growing health of the IT manufacturing sector. Achuthan, managing director at economic advisory firm Economic Cycle Research Institute, cites his firm's leading manufacturing index, which shows a strengthening economy. That index rose 1.1% in December and is hovering near record highs.

Achuthan points out that the IT sector is more volatile than other manufacturing industries--its ups and downs tend to be more pronounced, but they generally head in the same direction.

IT also plays a crucial role in the economy, he says. "In the wake of the recession," Achuthan says, "companies with very little pricing power had to squeeze costs, and they had two primary channels to do that: investment in product-enhancement processes and outsourcing. Both rely on IT to let them do that. It's critical to their business plans."