clarinews@clarinet.com (ISABELLE CLARY, UPI Business Writer) (02/03/90)
NEW YORK (UPI) -- New orders for electronic components dropped in January, signaling a slump in a wide range of sectors and leaving little hope for a strong rebound in the first half of 1990, the Electronic Buyers' News magazine said Friday. The magazine, in the latest issue to be available on newsstands Monday, said the Quest Index, which the publication started computing in July 1988, dropped 5.6 points to 48.3 in January from 53.9 in December. It was the steepest decline since July 1988 when the index stood at 54.8 points. A rating below 50 indicates a change ``from industry growth to a negative pattern,'' the Quest Index report said, with a dramatic drop in new orders reflecting the industry's slump. ``New orders dropped an extraordinary 11.2 points, to 45.1 from 56.3,'' the report said. Production fell 6 points to 49.7 from 55.7, inventories lost 5.4 points, to 44.7 points from 50.1. Employment in electronics-related sectors also showed a decline, although a more moderate one, with the index losing 2.2 points to 48.9, down from 51.1, the report said. The only gainer among the Quest Index's components was vendor deliveries, which rose 2.1 points, to 54.2 from 52.1, a positive economic sign, the survey said. The survey is based on a poll of more than 500 purchasing managers at electronic companies nationwide. ``The consensus from the survey suggests that the industry's sluggish pace extends to most sectors, from consumer to automotive and military wares,'' reflecting an overall lackluster economy, the report said. The report warned that purchasing managers felt the slowing down was not limited to the United States, as ``some respondents believe the electronic business is flat to down worldwide.'' The purchasing pattern of capital equipment in January was mostly unchanged. But it showed a disturbing trend with short-term orders increasing to 72.6 percent from 68.5 percent, while long-term orders dropped to 27.3 percent, down from 31.5 percent. The highly competitive market led to the first decline in prices since July, the report said. ``Given the manufacturing sector's present flirtation with recession, it is not at all surprising that the state of business activity in the electronics industry, as reflected by the Quest Index, fell below the growth line,'' said Richard Jacobs, who heads R.A. Jacobs Associates Inc, a New York-based consulting firm. ``I expect the industry to remain flat through the first half of the year and then reinvigorate as the economy rebounds and a new electronic product cycle comes of age,'' Jacobs said. Another industry publication, Electronics Purchasing, issued by Cahners Publishing Co., based in Newton, Mass., polled 500 electronics industry buyers. Electronics Purchasing said that 50 percent of the buyers polled reported cutting down inventories, up from 46 percent in December. ``The U.S. electronics buyers point out that their factories are still running at only 80 or 81 percent of capacity -- their lowest level since last fall,'' the survey said. ``Despite months of cutting back, January's inventories of electronic parts are still not in line with production of computers and other electronic equipment,'' the survey said. According to the monthly magazine, half the buyers polled said they were keeping their inventories at their current level, while 25 percent will be paring their orders in the next 90 days. It is proof that ``makers of electronic parts can expect weak orders in the months ahead,'' the report said.