Don’t write off the US economy

If it seems the walls are caving in on Silicon Valley, the avalanche of

negative business stories coming out of the area and other parts of the American

high-tech industry doesn’t paint as gloomy a picture as it would seem.

Except for the dotcom industry, which is quickly becoming one of the biggest

jokes in industrial history, the high-tech industry remains fundamentally

strong.

Clearly, the frenzy of the Internet and the huge demand for hardware,

software and services generated by the Internet as recent as six months ago,

generated a somewhat unrealistic picture of market conditions.

Companies that bought into the idea that the new economy was just starting

and would produce years of seemingly limitless business growth opportunities are

now finding themselves catering to a more traditional economy.

It can easily be expected that most high-tech companies will experience

sluggish sales growth, if any, during most of 2001 as the economy tries to

recover from the shock therapy that was applied in the fourth quarter. Already,

the US Federal Reserve has been lowering interest rates substantially and

President Bush Jr. appears on the road to getting the Congress to pass a

sizeable income tax cut. Both measures will help stimulate the US economy and

likely pull other economies with it.

Barring any major unforeseen circumstances, the high-tech industry will avoid

a recession, which would be a remarkable achievement in itself after eight years

of stunning growth. Rather than going into hibernation, the current economy is

probably best described as … dozing off.