Optimism with Respect to the Technology, Pessimism with Respect to Its Profitability
Take a look at what the Commerce Department's Bureau of Economic Analysis says about the pace of investment in computers and peripherals--both "nominal" investment (how many dollars are spent) and "real" investment (what those dollars buy in terms of computers and peripherals of the quality and performance made in 1996).
If you haven't been looking at these numbers or their like recently, they do surprise you:
Some salient observations:
- In the second quarter of 2002, our real rate of investment in computers and peripherals was 20.7 times as much as when George H.W. Bush took office in the winter of 1989.
- Real computer investment today is higher than at any time in history--6.1% above its previous all-time high reached at the peak of the late-1990s boom and bubble.
- During the recession real investment spending on computers and peripherals declined by 12.3% from its peak in 2000:III to its trough in 2001:III.
- Since its trough, real investment spending has risen over the past three quarters by 21.0%
These make you optimistic about the technology, no? The collapse of the internet bubble and the recession led to no more than a minor decline in real investment in computers and peripherals. We are now installing more computer power than ever before--a clear sign that even with all the economic and political and business model and intellectual property uncertainties, businesses are finding the things that computers do for them very valuable. They will continue to transform our economy and our world.
But there are some other, alternative salient observations:
- Nominal investment spending on computers and peripheral reached a peak in 2000:III.
- Thereafter it precipitously declined for four quarters, declining by a total of 29.4%.
- Since the trough, nominal investment spending has risen by only 7.7%--leaving us 23.9% below our all time investment spending high.
- It is true that nominal investment spending now is higher than at any time before 1997:I. And it is true that in the second quarter of 2002, our nominal rate of investment in computers and peripherals was 1.8 times as much as when George H.W. Bush took office in the winter of 1989.
- But relative to the size of the economy's total spending, investment spending on computers and peripherals is no larger a share of GDP than it was in the late 1970s.
These make you pessimistic about the profits of computer companies, no? Fifteen years of fire and technology and yet computer and peripheral manufacturers attract no larger a share of total GDP in spending on their products than they did back in the days of Ronald Reagan.
All these numbers are from the Commerce Department's Bureau of Economic Analysis's National Income and Product Accounts database.
Posted by DeLong at October 29, 2002 04:43 PM | Trackback