U.S. electronics factories increased sales by only 0.2 percent in April, according to the preliminary report from the Census Bureau. That was the bad news. The good news is that they maintained their 3.5-month order backlog and reduced their inventories 0.7 percent, the third consecutive decline.

April employment in electronics factories was the highest in six months. Employment typically declines each month unless production is rising strongly.

Overall, durable goods manufacturers had a very strong April with orders up 1.9 percent and shipments up 1.6 percent. These gains reversed similar declines in the previous two months. The bottom line: The manufacturing sector is clearly emerging from a brief period of declining sales and orders during the winter when buyers paused until they knew how high oil prices would rise. That caution is now eased with the price of oil settling in the high $40 range.

As a result, all of the major mechanical and electrical end markets for electronics had sizeable shipments increases in April. Machinery shipments rose 1.5 percent, electrical equipment 1.9 percent, motor vehicles 3 percent and aircraft 5.5 percent. Also, consumer retail sales increased 1.4 percent, including a 3.5 percent rise at computer stores. Preliminary data from U.S. trade partners suggests that another large gain in export sales occurred in April.

Computer, peripheral and storage device shipments from U.S. factories rose 5.9 percent in April to nearly 15 percent higher than the end of 2004. Telecom sales fell 9.8 percent. While shipments are very volatile in this market, monthly shipments through April are averaging below the late 2004 level. The major contributors to unexpectedly weak sales are probably the tail end of the Asian outsourcing push plus the slow introduction of cellular services already in place elsewhere.

Semiconductor shipments from U.S. fabs jumped 5.1 percent but remain below the peak reached last summer. With falling memory prices in the spring, this is a substantial increase in the number of parts shipped.

By: DocMemory
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