HENDERSON  FORECAST  SUMMARY                                                    SEPTEMBER 2006                                                          

As the global economy slows next year, consumer spending for electronic products will be under new pressure.  Galloping home prices, which have been a significant source of increased consumer wealth and spending, have finally slowed to a trot, or even a walk.  Moreover, hot products such as MP3 players and flat-panel TVs are beginning to slow as market penetration, if not saturation, begins to build.  Slower unit growth, combined with a continuation of brutal price competition, will erode  PC revenue growth further in 2007.  Despite another launch delay, the introduction of Sony’s PlayStation 3 (PS3) game console will create an exception among consumer products in that growth rates will accelerate for game consoles next year.  But overall, consumer electronics revenue growth will slip into middle single-digit gains next year, after double-digit advances in 2004 and 2005.

 No Chinese bounce for 2008    The global equipment slowdown is forecast to be mercifully short and shallow.  Central bankers are expected to begin lowering interest rates in 2007.  And energy prices should start to ease in 2008.  As a result, equipment demand will perk up.  However, because China will have captured most of the possible production-share gains by then, Chinese growth will be increasingly determined by overall global markets.   Also, the predicted appreciation of the yuan will take some of the luster off Chinese factories.  Still, output is still predicted to bound ahead by 16.4 percent in 2008.