SAN FRANCISCO (Reuters) - Demand for computers and electronic products rose 2 percent in November over the previous month as companies seized on low interest rates to place orders, giving the battered technology sector a shot in the arm, economists said on Friday.
The tech sector has been bloodied by recession and a brutal downturn this year and a number of large tech companies have warned of a drawn-out capital spending crunch next year. Amid those concerns, the tech sector received a boost from the November durable goods report on Friday, economists said.
Overall orders for expensive manufactured goods fell 4.8 percent to $175.5 billion in November from October. By contrast, new orders for computers and electronic products rose 2 percent to $35.56 billion for the same period, the Commerce Department said.
November's rise in new orders for computers and electronic products followed an 8.9 percent gain in October from September and an 8.5 percent drop in September from August.
Two straight months of rising orders show businesses are locking in low interest rates to buy technology, providing a glimmer of hope that capital spending will rebound and buoy tech companies, said economist Victor Canto of La Jolla Economics in San Diego, California.
"Technology is cheap," Canto said. "When you think rates have bottomed or will climb you buy."
The Federal Reserve has cut interest rates 11 times in 2001, slashing its key federal funds rate to a 40-year low of 1-3/4 percent from 6.5 percent at the start of the year. Analysts believe the cuts, paired with an inventory drawdown, have set the stage for an economic rebound in 2002.
"People are doing a little bit of ordering through some refinancing because of bargain-basement interest rates," said Donald Straszheim, president of Straszheim Global Advisors.
Two of three components within the Commerce Department's computers and electronic products category posted rising new orders in November from October.
Orders for computers and related products rose 2.7 percent and semiconductor orders increased 2.4 percent. By contrast, orders for communications equipment slipped 0.3 percent.
Straszheim said November's gains suggest corporations are positioned to continue to place new technology orders. But he said they will do so cautiously.
"November's report was clearly better from the tech perspective, but it is going to be a long time before this sector is healthy again," Straszheim said. "There will be an awful lot of bad earnings news in coming months, which will make business people making these orders more conservative."
clearly better news feeding through for the tech sector,i agree that it wont all be a bed of roses.
there will be plenty of holes along the way,but i think we've turned the corner.
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