BANNOCKBURN, IL – Industry sentiment in the electronics sector improved marginally in October after a sharp decline in September, according to IPC’s October Sentiment of the Global Electronics Manufacturing Supply Chain Report.

The Demand Index rose 1.3% in October, but demand sentiment remains muted for the second consecutive month. The Backlog Index, already in contraction, dropped another two points to its lowest level in a year. Capacity Utilization fell into contractionary territory, while the New Orders Index remained there for the second consecutive month. The Shipment Index rose from an all-time low last month, bouncing back into expansionary territory.

In response to special questions on interest rate cuts in Europe and the United States, electronics manufacturers expect interest rate cuts in Europe and the United States to have a moderate to minimal impact on the industry overall, with the greatest effect likely on capital investment, financing, and sales growth.

"Despite some easing in cost pressures, the outlook for costs actually increased in October as more manufacturers reported an expectation for higher labor costs in the coming months," said Shawn DuBravac, IPC chief economist and report author.

Additional survey data show:

• Half (50%) of electronics manufacturers are currently experiencing rising labor costs, with nearly two-fifths (37 percent) reporting increased material costs. At the same time, profit margins, ease of recruitment, backlogs, shipments, and orders are presently declining.
• Over the next six months, electronics manufacturers expect labor costs to remain high, while ease of recruitment, backlogs, and profit margins are likely to remain challenging.
• Electronics manufacturers in APAC expect backlogs to decline more so over the next six months when compared to firms operating globally.