Weekly Market Updates for March 7, 2012
03.07.2012 // Walt D. Custer // Industry Conditions
The U.S. Department of Commerce released its January “Durable Goods” report last week. In general, domestic electronics demand softened in the first month of 2012.
Here are some results:
January Semiconductor Shipments
The SIA announced that two major contributors to its monthly statistical program have withdrawn. Also SICAS announced that its quarterly capacity and utilization report will be discontinued, effective Q1’12.
Here are some preliminary results for January but we are not sure of the data continuity compared to prior months (since fewer companies now report). We assume that the SIA will clarify how it will rationalize the current and historical data going forward.
U.S. February Manufacturing PMI at 52.4 versus 54.1 in January (Chart 12)
Manufacturing ISM PMI 52.4; New Orders, Production and Employment Growing; Supplier Deliveries Faster; Inventories Contracting
Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee reported “The PMI registered 52.4%, a decrease of 1.7 percentage points from January’s reading of 54.1%, indicating expansion in the manufacturing sector for the 31st consecutive month. The New Orders Index registered 54.9%, a decrease of 2.7 percentage points from January’s reading of 57.6%, reflecting the 34th consecutive month of growth in new orders. Prices of raw materials increased for the second consecutive month, with the prices index registering 61.5%. As was the case in January, new orders, production and employment all grew in February — although at somewhat slower rates than in January. Comments from the panel continue to reflect a generally positive outlook for the next few months.”
Eurozone February PMI -Signs of Stabilization in Eurozone Manufacturing Soured by Greece (Chart 13)
Signs of stabilization in Eurozone manufacturing was soured by survey-record contraction in Greece.
Manufacturing PMIR (overall business conditions)
The Eurozone manufacturing sector showed further signs of stabilization in February. The seasonally adjusted Markit Eurozone Manufacturing PMIR rose to a six-month high of 49.0, unchanged from the earlier flash estimate and above January's 48.8.
Austria was the only nation to see any meaningful improvement, but the Netherlands reported the first positive reading for six months and France saw conditions stabilize after six months of decline. Germany registered growth for the second month running, albeit at a weaker pace than in January.
Elsewhere, Ireland saw manufacturing conditions deteriorate only marginally, posting the weakest decline in the current four-month sequence. But downturns in Spain and Italy continued at steep rates, albeit with some easing evident in Italy. The recession in Greece took a turn for the worse, when the PMI plunged to a record low.
Eurozone manufacturing production posted only fractional growth for the second month running in February as an ongoing decline in new orders restricted firms' willingness to raise output significantly. New orders fell for the ninth month running with the downturn in demand generally remaining broad-based as only Austria and the Netherlands reported increases. Greece saw records falls in both output and new orders.
The level of new export orders fell for the eighth month running, albeit at the weakest pace since last July. The drop in foreign demand was led by a Page 1 of 3 C Markit Economics Limited 2012 steep reduction in Greece and marked falls in Spain and Germany, the region's largest exporter.
Raw Material Prices Surge Higher
Increased prices for fuel, oil, plastics, steel and other raw materials led to the sharpest rise in manufacturers' input costs since June last year. Moreover, the acceleration in the rate of increase was among the steepest seen in the survey's history, largely reflecting a surge at intermediate goods producers (firms supplying products as inputs to other manufacturers).
Input price pressures rose in all of the nations covered by the survey, in most cases hitting levels last seen in the middle of 2011.
Updated charts for the exchange rates of the US$ versus various key trading partners:
Updated metal prices:
IPC Releases North American PCB Industry Results for January 2012 (Charts 27-35)
Rigid PCB shipments were down 3.1% in January 2012 from January 2011, but bookings increased 10.9% year-over-year. The book-to-bill ratio for the North American rigid PCB industry in January 2012 strengthened to 1.01.
Flexible circuit shipments in January 2012 were down 7.9% and bookings were down 29.4% compared to January 2011. The North American flexible circuit book-to-bill ratio rose to 1.05.
For rigid PCBs and flexible circuits combined, industry shipments in January 2012 decreased 3.5% from January 2011, while orders booked increased 6.2% from January 2011. The combined (rigid and flex) industry book-to-bill ratio in January 2012 continued to inch up and now stands at 1.01.
“Both rigid PCB and flexible circuit sales followed normal seasonal patterns in January, with sales down from December,” said Sharon Starr, IPC market research director. “The good news,” she added, “is that rigid PCB orders are up and the book-to-bill ratios for both rigid and flex improved again this month. They are now just above parity, which suggests a return to modest growth in the new few months.
Notice in (Chart 35) how North American rigid PCB order growth has now corrected from its 2010 bloat but appears to be headed into another period of excess ordering relative to domestic electronic equipment demand.
Worldwide Server Revenue Grew 7.9% and Shipments Increased 7% in 2011
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Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.
Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.
He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.