Brian.oco 0 Posting Whiz

From what I'm seeing out here in the trenches, economists just can't seem to agree on the health of the U.S. economy, in general, and the technology economy, in particular in 2008.

Last week's consumer numbers seem to suggest that people are still willing to break out the checkbooks and buy new computers, cameras, TV's and other tech-related consumer goods. CEO surveys are a bit more cautious, perhaps because marketing and research spending are flat so far in 2007.

To give us further hope, a new forecast out this morning suggests that the manufacturing economy - - especially computer makers -- is going to rise higher in 2008.

The forecast comes from supply management executives in their December 2007 Semiannual Economic Forecast. In a report released today, supply managers say that
expectations for 2008 are at a higher level for the manufacturing sector than the non-manufacturing sector.

Specifically, expectations for 2008 are high as 62 percent of survey respondents expect manufacturing sector revenues to be greater in 2008 than in 2007. The panel of purchasing and supply executives expects a 6.8 percent net increase in overall revenues for 2008, compared to an increase of 2.4 percent reported for 2007. Manufacturing industries expecting the greatest improvement over 2007 — listed in order — are: computer & electronic products; electrical equipment, appliances & components; transportation equipment; miscellaneous manufacturing; fabricated metal products; food, beverage & tobacco products; textile mills; paper products; and printing & related support activities.

In the manufacturing sector, respondents report operating at 82.9 percent of their normal capacity, up from 82.8 percent reported in April 2007. Purchasing and supply executives predict that capital expenditures will increase by a miniscule 0.7 percent in 2008, compared to a 18.2 percent increase reported for 2007. Survey respondents also forecast that they will reduce inventories in an effort to decrease their purchased inventory-to-sales ratio in 2008. Manufacturers have an expectation that employment in the sector will grow by 1.6 percent, while labor and benefits costs are expected to increase an average of 2.5 percent. Manufacturing purchasers are also predicting strong growth in both exports and imports. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners.

That bodes well for the tech sector, as the job picture appears to brighten and companies will at least hold the line on spending and hiring, if not devote tons of cash to supplies and personnel.

Suppliers also predict the prices they pay will increase 3.3 percent during the first four months of 2008, and will increase one percent during the balance of 2008, with an overall increase of 4.3 percent for 2008. Respondents' major concerns are: energy cost and supply; weak dollar; inflation; housing; and commodity prices.

The report offered a bonus to computer execs. A special question was asked to determine the progress of organizations in achieving efficiencies from the application of technology to supply management. Respondents believe they are only 51 percent complete on average in achieving benefits from technology in their supply chain, indicating there is still significant improvement to be gained from the application of technology in manufacturing. That room for growth could be a shot in the arm for tech companies in 2008, especially if the dollar weakens further and energy prices don't soften.

Survey respondents say expect to realize supply chain improvements through new or improved enterprise technology; improved inventory management; improved supplier management practices; supplier consolidation; and application of lean manufacturing concepts to supply chain.

Dry reading, I know. But the supply execs are a good barometer of how the tech market might look next year. And right now, their forecast looks almost bullish, compared to some of the other economic forecasts I've seen over the last month or so.

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