Last week, the economy gods were kinder than expected when the Commerce Department reported that factory orders rose 2.5% in August. Despite rising energy costs, the increase in U.S. factory orders was the biggest in three months. For durable goods, there was a 5.5% increase in orders for computers and other electronic gadgets.
The boosted outlook for computer makers helped order up a few upgrades on Monday for both IBM
Almost a year ago, semiconductors were in a downturn. Investors bailed as inventory problems swelled. Intel
The upswing could be quite large in the third quarter, as customers build up inventories before holiday shopping. Looking further, the book-to-bill ratio -- which measures orders received versus product shipped -- has shown improvement. In general, a reading above 1 is considered bullish. Based on preliminary data, this key industry metric was 1.05 in August, up from 0.93 in July and steadily rising since a low of 0.77 in February.
In addition, according to the Semiconductor Industry Association, August sales totaled $18.6 billion, a 1.7% increase from last year. Year-to-date sales are up 5.8% to $144.4 billion, on pace to cream last year's record results. But what about the second half of the year?
Although the recent effects of the hurricanes and high gasoline prices are not mixed into the batter yet, end markets for the semiconductor industry remain robust. Nevertheless, capital spending is expected to decline nearly 7% in 2005, and most experts say they are expecting greater demand for semiconductors to occur near the end of the year or early next year.
But so far, most of the ingredients needed to sweeten this quarter's earnings announcements have taken place. Will the big players like Intel and Texas Instruments
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Dell is a Motley Fool Stock Advisor recommendation.
Fool contributor M.D. Mitchell is down the street at the local junkyard looking for some good trash. He thinks books to bills would make birds fly slower, unless the bird is Mother Goose, of course. He owns IBM, but no other companies mentioned in this article.