In 2013 switch market sales in North America were up 6% compared to 2012. Will 2014 be another year of growth? To answer this let's take a look at the Institute for Supply Management's PMI, some sales and booking history, and how the economy could hurt or help.
PMI versus the Switch Market
The graph below shows the Institute for Supply Management's Quarterly (average of the three monthly numbers) PMI that measures expansion, readings above 50, and contraction, readings below 50, of the manufacturing sector of our economy. Sales and booking measures of the North American switch market have tracked fairly well with the PMI with the exception of the last two quarters.
The next graph plots the percentage change of the quarterly PMI. The rate of change peaked in Q2 and Q3 of 2009 then grew less slowly through Q2'10. Q3 saw the first negative reading since 2008. But growth returned in the Q4'10 and the first quarter of 2011. The second and third quarters of 2011 saw a deeper dip than 2010 but it recovered to positive territory in Q4 '11. The PMI has improved inQ1 of 2012 then shrank some each quarter. In 2013 the PMI improved throughout the year but dropped to 51.3 for January, down 5% from December.
Head Winds and Tail Winds
Economic head winds and tail winds may equal out. The global debt crisis seems to have subsided. The housing market is showing signs of significant improvement. A very large number of the unemployed serve the construction industry. If more of these folks go back to work more spending will occur.
|% Change From
|New Jobs Prior Year||% Change From
|4 Month Avg||175||-17%||210||-7%|
The table above shows United States Census Bureau's statistic on new jobs added to economy for the past four months and the trend looks stagnant at best with a four month average around 175,000, down 17% from the same period a year ago. Aside from October and November, jobs are being added at a slower rate than a year ago. Manufacturing is returning to North America as rising labor, transportation, and inventory carrying costs make China and India less attractive than they once were.
North American Conclusion
The PMI well above 50 for most of 2013 but moved significantly lower in January. Switch market sales trended higher for most of 2013. The employment picture remains stagnant but this may improve as the housing market does and manufacturing continues “re-shoring”. Last year the switch market finished up 6% from the previous year and hopefully it can do this again and grow 5%.
European Switch Market Outlook For 2014
In 2013 switch market sales in Europe were up 2% compared to 2012. Will 2014 be another year of growth? To answer this let's look at the Institute for Supply Management's PMI, some sales and booking history, and how the economy could hurt or help.
PMI versus the Switch Market
The graph below shows the Institute for Supply Management's Quarterly (average of the three monthly numbers) PMI that measures expansion, readings above 50, and contraction, readings below 50, of the manufacturing sector of the economy. Sales and booking measures of the European switch market have tracked fairly well with the PMI. The PMI for Europe moved below 50 in Q3'11 but may have reached a bottom in Q3'12 as moved above 50 in Q3 and Q4'13. In January of 2014 the PMI was 54.0.
The next graph plots the percentage change of the quarterly PMI. The rate of change peaked in Q2 and Q3 of 2009 then declined through Q4'11. Since then, the PMI growth trend has moved upward with its highest mark in almost four years occurring in Q3'13.
General unemployment in Europe remains at double digit levels, however, Germany's rate is 5%. The situation in Greece and Turkey seems stable at the moment but this can change as it has in the past. Uncertainty is the bane of economic growth.
The PMI for Europe was above 50 for the last half of 2013 indicating manufacturing activity was increasing. The PMI has improved since Q3 of 2012. The difference between the trailing 4 quarters of bookings and sales has increased. All of these seem to indicate an improving time for the European switch market. Perhaps it can grow 3% to 5% in 2014.