Industry cycle slows down

Take a pot of uncertain global economic slowdown, sprinkle in the detrimental effect of a US housing crisis spilling into the wider economy, add a dash of both production and sourcing moving out of the UK and you’ve got the recipe for an unsettled market that shows no signs of improving in the short term. Indeed, during 2007, the UK electronic components market bore the brunt of slowing domestic and European economies, a lack of confidence in the financial markets and price erosion and a significant increase in Eastern European manufacturing. In its latest UK electronics components market forecast, UK trade association afdec concluded that whilst the total market in 2007 will have declined by 8%, distribution’s total available market (dtam) will have declined less (by 6%) due to authorised distributors gaining an increasing share of the market. With continuing economic uncertainty and a slow down in the growth of the world’s economies, afdec forecasts that the dtam will decline by a further 1.8% in 2008, before showing a small growth again in 2009. “The world economy is slowing,” explained afdec’s market analyst Aubrey Dunsford. “The International Monetary Fund (IMF) forecasts that even China’s economy has slowed from 11.5% to 10% -- still an enormous growth rate, but slowing all the same. Europe has slowed significantly from 2006, particularly Germany – usually Europe’s powerhouse – down from 2.9% last year to 2.4%, with the forecast going down to 2% in 2008.” He adds that the key economic consideration here is the price of oil, which still hovers around $100 a barrel and shows no real signs of coming down. Rising oil and energy prices have caused inflationary pressures in all the major economies, forcing the major central banks to push interest rates up.