The relay market started 2008 with first quarter sales dollars down about 1% from Q4 of last year. The encouraging news is booking dollars rose 7% quarter over quarter. The results from Q1 2008 Relay Report are summarized below.

Concerns about the economy abound - are we headed for recession, in recession, or will a recession be avoided? The results of a Cumulus Market Notes survey may provide some insight and follows the relay market information.

The Relay Market

The first quarter of this year was weaker in total sales dollars and average selling price (ASP) compared to Q4 and Q1 of last year. The EMR (Electromechanical Relay) type performed the same as the total. Both types of relays saw units improve over last quarter but remain significantly lower than the same quarter a year ago. Solid State Relays (SSR) realized better sales dollars than last quarter. ASPs were lower than the previous quarter and last year.

Sales Growth by Relay Type

Reported booking dollars grew slower than units, or decreased faster, forcing an increase in ABP for EMRs and SSRs when compared to the previous quarter. Total sales dollars and units improved from the previous quarter on the strength of EMRs. Compared to the same quarter of last year booking results for both types were down in dollars and to a lesser extent in units with lower prices.

Bookings Growth by Relay Type

Sales and bookings have trended lower over the past 9 quarters from a peak in Q1 of 2006 as shown in the Total Relay Sales and Booking Index graph below. Sales dollars and units were at an annual high in Q1 of 2007 and fell to a low in Q4, then dollars inched down Q1 of this year as units rose. Booking dollars also set a 2007 low in Q4 and moved up in Q1. Booked units have moved up and down slightly over the past five quarters.

The overall selling price came off a five quarter high in Q4. The ABP rose back above the ASP after spending one quarter below it. This can be seen in the Total Relay Price Index graph below showing the ASP slipping from its best level since Q1 of 2007 and the ABP rising above it.

Book-to-bill dollars and ABP-to-ASP crept back above 1.0. Book-to-bill units settled at 1.0 its second best mark in five quarters.

Grocession

In an April statement former Fed Chief Alan Greenspan said, “The country is in the throes of a recession”. Around the same time, Martin Feldstein the leader of National Bureau of Economic Research, the organization responsible for the official declaration of a recession, stated in a CNBC interview, “I think the professional forecasters have been a little slow to come to the recognition that we’re in a recession.” Let me paraphrase Warren Buffet from CNBC interview in March: If we are not technically in a recession, it certainly feels like one.

By technical definition a recession is two consecutive quarters of negative gross domestic product growth. It generally includes a period of high unemployment which causes reduced consumer spending. According to revised figures the economy grew at 0.9% in Q1 of this year following a weaker 0.6% growth in Q4 of last year. So “technically” a recession has not yet begun. However, January, February, March, and April all saw negative job growth. General Motors has just announced that 19,000 union workers have accepted buyouts and will leave the company. While Ford will lay-off 2,000 office workers before the beginning of August. Both of these automakers are hurting as sales fall and costs increase.

Gasoline is at $4.00 so it now takes $80.00 to fill a twenty-gallon fuel tank. Food prices are rising as corn and other grains are sold to make ethanol instead of bread or feed for livestock. So consumers have far less to spend at the mall than they did a year or two ago.

So what is it? Unemployment is rising and consumer spending, ex-food, and energy are declining. It does certainly feel like a recession.

Each month Cumulus survey’s the relay and switch community to understand how the market is fairing. Starting in January a question was added concerning recession. The question simply asks if we are headed for a recession, in a recession, or if a recession will be avoided. This is not a scientific study and the results have not been statistically validated, but here are the results.

The graph below shows the percentage of respondents that said a recession will be avoided (green segment), we are headed for a recession (yellow segment), and we are in a recession (red segment) for the months of January through May of this year. At the beginning of the year about 10% to 15% of the respondents felt a recession would be avoided, let’s call these the “Economic Bulls.” In recent months the ranks of “Economic Bulls” has grown into the lower twenties. However, the “Economic Bears,” those that think a recession is coming or that it is already here, are clearly the majority and their opinion is shifting.

The next chart looks at “Economic Bears” to see what percentage think a recession is coming versus those that feel we are in recession. At the start of the year the majority, 70%, felt a recession is in the future and the minority thought it was already here. Since then a reversal has occurred. Now the majority of “Economic Bears” feel a recession has arrived instead of believing it will occur in the future.

So today, over 50% of those surveyed in the relay and switch industry believe a recession has arrived. The economic data still shows growth, albeit at a snails pace. Earlier this year the folks at Wachovia came up with a new economic term to describe their forecast for the U.S. economy - grocession. Not a technical recession with negative growth but an economy that displays the symptoms of recession and still squeaks out some growth.