Electronics lags behind

According to a recent EBN report, the US Department of Commerce said that electronics was the poorest performer in the country’s economy.Judging by Q1 operating profits, electronics was the poorest performer in the US economy this quarter, losing more than motor vehicles, industrial machinery, transportation services and oil, each of which is, like electronics, a very cyclical industry. the US Department of Commerce, reporting on industry operating profit as part of the GDP accounting system, indicated that the electronics industry lost $10.9 billion at a seasonally adjusted annual rate in Q1, a small improvement from the $13.3 billion loss the previous quarter. It’s a long way from the peak of $25.4 billion in the summer of 1997.All other durable goods manufacturers posted an aggregate profit of $17 billion in the first quarter, up from $1.1 billion in the previous quarter. This more than accounted for all of the Q1 profit gain from $63.6 to $77.6 billion posted by all manufacturers excluding electronics. Similarly, for the whole economy except electronics, profits rose from $482.2 to $539.4 billion. Profits in electronics have declined steadily since the summer of 1999 when they totalled $7.6 billion – to the point that the cumulative profit over the last 13 quarters amounts to zero. The only good news is that losses were reduced in this last quarter, putting electronics on track with other cyclical industries that also showed first quarter improvement. The outlook is for continued profit improvement into 2004. However the current low level and recent plunge of electronics stock market indexes suggests that the financial markets do not anticipate a return to profitability in the current quarter.