Beginning with July 2008, ECA has made two major changes in its monthly order index, which for 12 years has been a barometer for market trends in the electronic components industry.

The first change has been to update the index baseline year from 1996 to 2006, which better reflects today’s market realities. The second change is to report numbers for North America only, which is expected to improve the consistency of results from reporting companies.

The actions came as a result of research by the ECA passive components market services committee, which has responsibility for ensuring accuracy of the association’s market reports.

A leading indicator

While not a forecast of future sales activity, the index has proven to be a leading indicator of market movement and sales trends. Actual sales numbers tracked by several marketing firms have shown that the index provides a four- to six-month glimpse of potential ups and downs in the market. In fact, the index portended the collapse of the electronic components market in 2001, although few could grasp the warning signals at the time.

The new index reflects more dramatic movement in the adjusted four- to five-week order trending. Results from the 12-month moving average are expected to be similar to previous reports based on the 1996 baseline.

The ECA indexes provide relevant trends based on recent history, and are not used to calculate actual sales revenues. Still, the monthly order report from ECA provides member companies and market analysts with a valuable tool to adjust forecasts up or down based on future market expectations.

ECA’s market services committee believes the new index will better represent manufacturers’ order activity and month-to-month fluctuations.

Global downturn, but not dire

Although complete numbers were not available at press time, ECA survey results over the first three weeks of the month showed that August was following the trends of July, with an overall downturn in orders compared to 2007. Orders started out strong in August, plummeted during the second week, then rallied in the third week.

JPMorgan reported that July orders received by 13 major electronic component manufacturers in Asia fell 4.9 percent compared to last year, a slight improvement from the 5.9 percent decline in June. The report stated that domestic orders slumped because of the summer holidays and some cutbacks in production of digital consumer electronics and cell phones. The month-over-month decline in overseas orders was linked to declining cell phone component orders from North America and Europe, offsetting strong orders from South Korea and China.

Fall growth expected

Order growth in Asia between now and the end of the year is likely, according to JPMorgan, followed by a pullback after year-end. The value of Asian orders are expected to peak in October or November. Similar trends can be expected in North America, as companies begin to gear up after the summer lull. Traditionally orders are strong in October and the beginning of November, before winding down in conjunction with the holidays.