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Shaky global GDP cuts IC market forecast

Posted: 31 May 2013 ?? ?Print Version ?Bookmark and Share

Keywords:IC market? GDP? market growth? IC Insights?

The lacklustre GDP forecasts for countries and regions have affected the IC Insight's global GDP forecast. The market research firm lowered its forecast from its initial 3.1 per cent last March to 3 per cent this month.

The slight reduction of the worldwide forecast was because of the reduction of the GDP growth forecast posted for the U.S. of 2.2 per cent. The decrease is due to sequestration or large and widespread cuts to government spending that the country is experiencing.

GDP breakdown

Worldwide GDP breakdown (2012-2014F)
Sources: World Bank, IMF, IC Insights

In contrast to the lower U.S. GDP forecast for this year, IC Insights raised its expectations for 2013 GDP growth in Japan to 1.7 per cent, up from 1.2 per cent. In addition to fiscal stimulus measures, the Japanese government has undertaken a programme to significantly devalue its currency (i.e., yen). These stimulus measures, in concert with the currency devaluation programme, helped boost Japanese company exports in early 2013. As a result, the Japanese economy registered a 3.5 per cent annualized increase in GDP growth in 1Q13. Although this high level of growth is not expected to continue throughout this year, the expectations for Japan's economy this year are definitely on the rise.

China's GDP growth rate was announced to be 7.7 per cent in 1Q13. With China's economy expected to pick up momentum in the second half of this year, IC Insights has left its 8.1 per cent full-year forecast for China's GDP growth unchanged.

Unfortunately, with little good news coming out of Europe in early 2013 and the full impact of the U.S. sequester cuts still looming, IC Insights still believes that there continues to be more downside risk to its worldwide GDP growth forecast for this year than upside potential.

IC Insights believes that the correlation between worldwide GDP growth and IC market growth has been excellent over the past few years and will again be good in 2013. Using IC Insights' most current worldwide GDP forecast of 3 per cent, the most likely range for IC market growth in 2013 is still 3-7 per cent. As a result of weaker GDP growth in the U.S. and negative growth among the Eurozone countries, which, together account for about 43 per cent of global GDP, IC Insights has lowered its 2013 IC market growth forecast one percentage point to 5 per cent.

GDP vs IC growth

Relationship between worldwide GDP and IC market growth
Source: IC Insights

IC Insights' 5 per cent full-year IC market growth scenario for 2013 incorporates a 2H/1H 2013 IC market increase of 8.8 per cent (0.4 points less than the 22-year average of 9.2 per cent). Thus, it is assumed that there will be a slightly below normal seasonal increase in IC demand in the second half of 2013 as compared to the historical average but a much stronger increase than in 2H12/1H12 (3.6 per cent).

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