US Tech Market Getting Stronger: US Q2 2013 GDP Report And Data Revisions Show Weak But Improving US Economy, And Better Tech

Andrew Bartels

The US Bureau of Economic Analysis released its preliminary report on second quarter 2013 US GDP, along with both major revisions to US economic data over the past 50 years, and minor revisions to the data on US business investment in information technology goods and services.  Here are my key takeaways from the report, and its implications for the US tech market.

  • US real GDP growth in Q2 2013 came in better than expected.  The 1.7% growth at an annual rate from Q1 2013 was in line with our projection of 1.9%, but better than what many economists had been forecasting.  Growth rates in Q4 2012 and Q1 2013 were revised down to 0.1% and 1.1%, respectively, from the earlier 0.4% and 2.5%.  These revisions indicate that the end of the payroll tax reductions, the higher tax rates for high-income people, and the Federal budget cuts from sequester did take a toll on economic growth, with government consumption declining in Q4 2012, Q1 2013, and Q2 2013, and business investment in factories and offices falling in Q1 2013.  But consumer spending has been solid, with growth of 1.8% in Q2 2013, 2.3% in Q1 2013, and 1.7% in Q2 2013.  Business investment in equipment, which softened to just 1.6% growth in Q1 2013, improved to 6.8% growth in Q2 2013.  And housing continues to be a growth engine for the US economy, with double digit growth rates in residential investment in the past four quarters, and improving home prices boosting consumer confidence and spending.
Read more

Mixed Is The Word For the Global And European Tech Markets In Mid 2013

Andrew Bartels

At the half mark through 2013, both the global and the European tech markets have pockets of strength and other pockets of weakness, both by product and by geography.  Forrester's mid-2013 global tech market update (July 12, 2013, “A Mixed Outlook For The Global Tech Market In 2013 And 2014 –The US Market And Software Buying Will Be The Drivers Of 2.3% Growth This Year And 5.4% Growth Next Year”) shows the US market for business and government purchases of information technology goods and services doing relatively well, along with tech markets in Latin America and Eastern Europe/Middle East/Africa and parts of Asia Pacific.  However, the tech market in Western and Central Europe will post negative growth and those in Japan, Canada, Australia, and India will grow at a moderate pace.  Measured in US dollars, growth will be subdued at 2.3% in 2013, thanks to the strong dollar, and revenues of US tech vendors will suffer as a result.  However, in local currency terms, growth will more respectable, at 4.6%. Software -- especially for analytical and collaborative applications and for software-as-a-service products -- continue to be a bright spot, with 3.3% dollar growth and 5.7% in local currency-terms. Apart from enterprise purchases of tablets, hardware -- both computer equipment and communications equipment -- will be weak. IT services will be mixed, with slightly stronger demand for IT consulting and systems integration services than for IT outsourcing and hardware maintenance.  

Read more

Dark Clouds On The Tech Horizon Redux: Europe Drops, China And India Slow, US And Canada Limp Along

Andrew Bartels

Haven't we seen this show before?  Like last year?  Once again, Europe wrestles with and is again losing against its debt crisis.  Once again, after some promising growth in late 2011, the US economy is showing signs of losing steam.  Once again, China and India are flashing distress signals.  And once again, John Boehner and the Congressional Republicans are threatening to refuse to raise the US debt ceiling unless US Federal spending is cut sharply. 

Last year, the mid-year economic troubles did take their toll on tech purchases in the third and four quarters of 2011, but a last-minute resolution to the US debt ceiling issue, the European Central Bank's aggressive lending to banks so they could buy Italian and Spanish government debt, and some strength in US consumer spending, Germany's surprisingly strong growth, and continued growth in China revived global economic growth in Q4 2011 and into Q1 2012.  Much depends on whether this pattern of slump and revival will recur again in 2012.   My bet  is that we will in fact see the same pattern. 

So, let's look at the economic evidence, and then the tech market evidence. 

  • US economy slows but continues to grow.  In the US, the US Bureau of Economic Analysis on May 31 revised down Q1 2o12 real GDP growth to 1.9% from 2.1% in the preliminary report, and on June 1 the US Bureau of Labor Statistics reported that a disappointing 69,000 increase in payroll employment in May, the second month of sub-100,000 job growth.  On a more positive note, US retailers and auto makers reported good sales growth in May, while gas prices at the pump continued to fall from peaks earlier.   My take is that we will see real GDP growth in the 1.5% to 2% range in the remainder of 2012, down from my earlier assumption of 2% to 2.5% growth. 
Read more