All the talk in finance departments across the European Community is of recovery in 1997, but evidence from the markets is of deepening recession. Latest evidence that Europe is diverging from the US is that while the latter reported a semiconductor book-to-bill ratio of 1.10, in Europe, the ratio in December was on the verge of disappearing under water, dropping to 1.00 from November’s 1.05. December’s orders were off 6.4% and sales were down 1.8% from the previous three-month period, according to Brown Brothers Harriman & Co analyst William Milton. The downward trend rather than the actual number itself made the decline somewhat worrisome for Milton, who added to Dow Jones & Co that the situation warrants continued close observation at this point. The November ratio had already plunged from October’s indicator of 1.17. The European semiconductor market is more focused on telecommunication and industrial uses for chips, compared with the US, which has a higher concentration used for personal computers. In the US therefore, the indicator is a less reliable pointer to the underlying economy, because the availability of new software and new processors can boost or devastate personal computer sales whether the rest of the economy is buoyant or not.
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