Electronics and Consumer Goods

Electronics Poised for Rebound
Our own business index shows that the electronics industry has generally been trending down since early 2014, and broader data on spending and production in the electronics industry shows that it has been struggling since 2013. But if you look back through the historical data, “struggling” for the electronics industry really just means slower growth, since the spending on and production of electronics almost never contracts.

However, the industry seems to be bottoming out and turning toward accelerating growth. An early leading indicator of this is that real disposable income has been growing faster and faster every month for nearly a year. In fact, disposable income is growing at its fastest annual rate in nearly two years, which also is virtually the fastest rate of income growth in almost seven years.

Disposable income tends to lead electronics spending by six to nine months. Incomes started moving in a positive direction in December 2013, and, sure enough, electronics spending started growing at an accelerating rate last fall and has continued to do so in recent months. Given the strength of the acceleration in disposable income, electronics spending should see significant growth in 2015.

Of course, production tends to lag consumer spending by about three months. Production of electronics appears to have bottomed out in the last month or two. Based on the leading indicators, it appears that production of electronic parts should grow at a rather rapid rate this year. This is a good sign for those that make molds for electronics and for the plastic processors that make parts for the electronics industry.