Forrester US Tech Sector Index: Q2 2007

The health of the US tech sector improved in Q2 2007, according to the Forrester US Tech Sector Index. The index reversed the Q1 decline and moved above the prior peak in Q4 2006. Second-quarter results were generally strong, with six of the 11 underlying measures gaining in the quarter. Of the remaining indicators, three showed slight declines, while two hovered unchanged. Three of the four forward-looking measures — CIO confidence, outlook for business investment, and venture capital investments — and US vendors' global revenues helped to pull the index up. Signs of recovery are here, and solid gains may be on the horizon. However, there is also fragility. With the demand indicators still below their peak in Q1 2006 and supplier indicators flat since 2005, it is the financial strength indicators of profits and stock prices that are keeping the index up. Unless US demand continues to strengthen, the high-wire act of strong vendor profits and rising stock prices despite soft demand may run out of line.