By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index edged back
four-tenths in the May 28 period to 59.0, a reading well over breakeven
50 to indicate significant growth for the industrial sector, according
to the results of Market News International’s weekly survey.

Sales are at a year-on-year +10.4%, the best reading of the
recovery. Depth is very strong with half of the period’s 245 company
sample reporting gains of 10% plus. Income is at +27%.

Last week’s benchmark revisions for the durable goods series added
significantly to capital goods shipments. For the nondefense series,
January to March this year was raised up by $8.4 billion to pull this
year’s monthly average to $61.2 billion. The monthly average for 2009
was increased to $59.8 billion from an initial $57.3 billion as $29.5
billion was added to the year. The revision added $46 billion to 2008
and $48 billion to 2007.

The upward slope for this sample, which was very steep at the
beginning of the year, may be peaking. The four-week average of 58.2 is
down from a May 7 peak of 59.4 and though sales readings are still very
strong, the ongoing rise in the dollar may reverse what has been a 3%
currency benefit to exports so far this year.

Slowing or not, capital-goods growth is very strong and widely
based, led by electronics machinery and now including strength for
construction equipment makers who report residential activity.

Filter maker Donaldson (DCI) offers a wide view of different
markets seeing continued gains for construction and mining equipment as
customers increase production rates to match growing end-user demand.
Donaldson sees a modest increase for farm equipment but warns of a
continued slowdown in U.S. military spending.

Commercial aerospace is likely to be a building area of strength
given steady progress with the Boeing 787 program and signs of rising
passenger demand. Drill bit maker Heico (HEI) reports early signs of
recovery in the commercial aircraft aftermarket.

Editor’s Note: MNI compiles its capital goods index based on a
weekly sample of company news and data.

** Market News International New York Newsroom: 212-669-6430 **

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