The macro-economic outlook has played a major role in shaping the performance of the IT channel across Europe in recent quarters. And the latest data would seem to back our predictions for Q2 and the rest of the year: a continued slump in sales of mobile computing products through distribution.
High inflation and costs have been the economic story of the past year. They've sapped consumer confidence and forced many businesses to delay IT spending. While by no means the only factor, it helps to explain why we recorded a -26% year-on-year drop in mobile computing unit sales in Q1 2023 and a decline overall of -24% in the PC category. We expect continuously weak demand in Q2, driven by this economic picture.
This is backed by the latest figures which show inflation in the euro area at 6.1% in May. Although down from a high of 10.6% in October 2022, core inflation has proved stubbornly persistent, forcing European policymakers to raise interest rates to a 22-year-high of 3.5%. In the UK, the picture is even grimmer. The Consumer Prices Index (CPI) stood at 8.7% in May, unchanged from a month previously, while core inflation surged from 6.2% to 6.5%-its highest figure in 30 years.
All of this impacts both business and consumer demand. It's a big part of the reasoning behind our predictions for Q2 mobile computing sales. Our optimistic forecast predicts a -23.3% year-on-year (YoY) decline in unit sales for Q2, while the pessimistic scenario has sales falling by -32.5% over the period.
The outlook for the rest of the year is of improved performance across both our optimistic and pessimistic scenarios. Our central prediction is that demand will improve slowly, before really recovering in Q1 2024, as the macroeconomic gloom lifts and Windows 11 refreshes kick in.
But there is still uncertainty over how quickly the regional economy will rebound. With the IMF warning of rising worker demands for wage increases, much will depend on how far these extra costs will be absorbed by companies, and if falling profits have the effect of pushing out a rebound in corporate PC demand even further.
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