Without any warning, the Census Bureau excluded semiconductors from March's advance durable goods. At the time of the release, it stated that a large number of semiconductor manufacturers were no longer choosing to participate in the voluntary survey and the sample size was no longer sufficient to produce a monthly estimate. Certainly, it is understandable that the Census Bureau would want to maintain the integrity of the data, but typically changes in data are announced in advance! Oh well...

Semiconductors accounted for nearly 3.5 percent of durable new orders last year, not insignificant but not enough to render the advance durables report useless. However, the semiconductor industry is important and it would be useful for market players and analysts to have a substitute source of information

SEMI
Semiconductor Equipment and Materials International (SEMI) publishes a monthly Express Report that details billings, bookings and the book-to-bill ratio. Billings correspond to shipments; bookings correspond to new orders. The book-to-bill ratio represents how many new orders are received for every shipment made. When the book-to-bill ratio is greater than one, it means that more new orders are coming in than shipments going out. The book-to-bill ratio had been below one since December 2000. It reached 1.04 in March, an encouraging milestone.

Is the data useful?
The SEMI data has roughly a ten-year history. In the past, bond and equity traders speculating on daily movements in prices have followed this indicator. Given that the data was often available at roughly the same time as the durable goods report, Wall Street economists were not altogether gung ho on following another indicator. It is possible that this report will get more attention now that data on the semiconductor industry is now excluded from both the advance durable goods and factor orders reports.

On the whole, the dollar level of billings recorded by SEMI and the dollar level of shipments reported by the Census Bureau didn't match, but the pattern of changes were in line. In fact, the SEMI data are already reported as a 3-month moving average and tend to be smoother than the new orders and shipments figures that came out of the durable goods report.

The pattern of bookings is much smoother coming out of the SEMI data than the monthly figures from the Census Bureau. Perhaps the sharp fluctuations had less to do with the quantity of orders and more to do with the lack of cooperation among large semiconductor manufacturers in sending the information to the Census Bureau!

SEMI vs. Philadelphia Semiconductor Index
Over the past couple years, the book-to-bill ratio had moved in line with the Philadelphia Stock Exchange's Semiconductor Index of leading chip companies. Oddly enough, even though the book-to-bill ratio is now rising more decidedly, it appears that stock prices in the industry have stalled. This could be a reflection of the entire market, not just semiconductors. In any case, a rising trend in the book-to-bill ratio general portends friendly market conditions. Perhaps the industry is poised for recovery.

Evelina M. Tainer, Chief Economist, Econoday