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Computers & Electronics
Text Box: Real average hourly earnings is the hourly salary of production workers discounted for inflation. The earnings of production workers is a good leading indicator of what consumers are spending on video, audio and computer goods. You may wonder why we aren't using real personal income like we did to forecast aerosapce industrial production. It turns out that real personal income tends to lag slightly the consumption of electronic goods. One rationale for this is that consumers use their wages, which is closely to linked to real average hourly earnings, to buy electronics instead of their total income, which includes interest, dividends, rental income and other sources of income. It's important to note that consumer spending on electronics has been growing for 40 years, even when earnings are contracting. On average, changes in real average hourly earnings leads real video, audio, and computer goods spending by 10 months. Current Comment - Earnings growth has slowed down the last couple of months. Since 1980, earnings have started growing three times and each time growth in spending on electronics spiked to more than 24%. This expected spike in spending seems not to have happened. Now that earnings have turned down it looks that spending will continue its downward trend.
Text Box: It makes sense that consumer spending on video, audio, and computer goods is linked to industrial production of computer and electronic products. The chart below shows that there is a very good correlation between what consumers spend and what manufacturers produce. On average changes in electronics spending leads changes in industrial production of computer and electronic products by 10 months. Current Comment - Spending on electronics has slowed in the last couple of months and industrial production of electronics seems to be following suit. With spending looking like it will continue to decelerate, industrial production should continue to do so as well.
Sources
Average Hourly Earnings
Consumer Price Index
Consumer Spending
Industrial Production
For more information contact Steve Kline, Jr., financial analyst.
513-527-8800
skline2@gardnerweb.com
Links to other Financial Data from Gardner Publications, Inc.
2008 Capital Spending Survey and Forecast Results
Metalworking Business Index
2008 Capital Spending Survey and Forecast Demographic Reports 
Current and past surveys conducted by Gardner Research
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Modern Machine Shop
Production Machining
Moldmaking Technology
Automotive Design & Production