Europe braced for a softer, gentler crash

AUGUST 20--Electronic distributors in Europe are anticipating a downturn that will come with less severity than the blows taken by North America and Asia.

Aug 20th, 2001

AUGUST 20--Electronic distributors in Europe are anticipating a downturn that will come with less severity than the blows taken by North America and Asia. Between a smaller dot-com boom and an efficient distribution system, leaders at distributors think Europe may get clobbered less severely by the deep drop and inventory problems suffered in Asia and the USA.

The downturn in Europe began in the mid-spring of 2001, a few months later than the Asian and North American downturn. Europe traditionally lags a few months behind North America�s business cycles.

�Germany has declined faster than other countries,� said Nick Ross, director of group communications at Avnet Inc. (Phoenix, AZ).�The economists in Germany have called it quite a severe downturn, and I think they�re correct. But people take their holiday in July and August, it�s hard to tell what�s going on.�

Though many experts don�t believe Europe�s drop will ultimately be as deep as Asia and the USA, distributors did feel a sharp jolt in the second quarter of 2001. �It has certainly been quite sharp in the second quarter,� said Gary Kibblewhite of Euro Partners in London, England. �Billings have been down about 15% in the second quarter from the first quarter. In France, Q1 was strong, and Q2 billing was sharply down 15% to 20%.�

Others are concerned Europe�s decline could be just as steep as the USA and Asia. �Will it be as deep? Difficult to tell,� Ross said. �There is large exposure in all of these countries to telecommunications. On the electronics side, I think it�s going to be fairly tough. It won�t be as severe as what�s happened to Nortel or Lucent (Technologies Inc.), but it�s going to be tough.� Ross noted Europe is suffering an inventory pile-up similar to the USA. �Listening to the industry from suppliers and other distributors, it�s clear that inventory levels are higher than they would usually be for manufacturers as well as distributors.�

Just as the downturn lagged behind North America and Asia, distributors expect the upturn will eventually lag behind as well. �I think it will pick up three to six months after the US market,� Ross said. �That�s historically been the case.�

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