Apr 23, 2004 (11:04 AM EDT)
Iraq War Skews Data On Computer Orders And Shipments

Read the Original Article at InformationWeek

A quick glance at the latest report on computer orders and shipments doesn't look encouraging. But first looks don't always tell the full story.

The Census Department reported Friday that new orders for computers on a seasonally adjusted basis was unchanged last month from February, and that shipments rose a modest 1.3%. Contrast that with overall durable goods orders that climbed 3.4% and shipments that rose 3.2%, and the IT sector looks anemic.

But Tom Fullerton, an associate professor of economics at the University of Texas-El Paso, says seasonally adjusted numbers aren't always the best ones to determine the health of an industry. With a war going on in Iraq, times are different--and the reasons economists like to look at seasonally adjusted figures don't necessarily apply. "A war economy disrupts the normal patterns of production and distribution," Fullerton says. "Seasonal adjustments are sensitive to things like that, causing them to be less representative of current conditions."

The raw stats reveal that orders for computers soared 40.4% last month, and shipments rocketed 47.5%. For the past 12 months, new orders increased 17.4% and shipments rose 20.8%. "Anytime you have double-digit increases, it will lead to better profitability and eventually to higher payrolls," Fullerton says.

Another encouraging sign: decreasing inventories, signaling that IT manufacturers are moving product. Computer inventories last month fell 0.5% on a seasonally adjusted and 5.8% on a non-seasonally adjusted basis. For the year, IT makers shrank inventories by 6.6%.

That's not necessarily good news for CIOs, however. "With inventories in decline," Fullerton says, "we'll start seeing an increase in prices if that's not already noticeable."