Hard Facts: February 25, 2002

A number of key economic indicators are now pointing to economic recovery. Consumer confidence, critical to consumer spending and economic growth, is rising following a sharp plunge in the second half of 2001. The manufacturing sector is showing strong signs of breaking out of a nearly two-year slump. And the U.S. economy actually grew slightly in the fourth quarter of 2001, which surprised most economists, who had expected the economy to continue contracting.

Solution providers are reacting positively to this data, boosting near-term sales expectations. Overall expectations in January were at their highest level since before Sept. 11, and well above the low in October, although only 40 percent as strong as expectations in the base year of May 2000.

This trend extends to individual product categories as well. In the area of networking hardware, for example, 53 percent of solution providers surveyed in January said they expected sales growth of at least 6 percent over the next three months, up from 39 percent in the December survey. The percentage of solution providers expecting a decline in sales fell below double-digits for the first time since August.

Despite the more positive outlook, economic warning signs remain. Layoffs are still continuing, although the pace has dropped in recent months. More ominously, the rate of growth of consumer debt has increased sharply in recent months, raising questions as to whether the current pace of consumer spending,which accounts for two-thirds of gross national product,can continue.