By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index slipped back
slightly in the Aug. 27 period to a 70.8 level that points to strong
growth ahead for the industrial sector, according to the results of
Market News International’s weekly survey.

The sample isn’t indicating acceleration in growth as the index has
been higher in recent weeks. The four-week average, also at 70.8, is
down two tenths in the week for its first decline in two months.

Year-on-year sales slipped back three tenths to a still very strong
+17.3%. Income, at +55%, shows its best level of the recovery. Sample
size is 238 companies.

Last week’s durable goods report raised serious questions over the
outlook for orders in the capital-goods sector. New orders in the
nondefense category fell 2.8 percent and, at $64.1 million, fell below
shipments for the first time since March.

But new orders can be lumpy and they did show very great strength
during the second quarter which in turn points to strength in shipments
for the third quarter.

If shipments do no better than hold steady at July’s $64.7 billion
level, third-quarter shipments for the nondefense capital-goods category
would show a 2.9% gain from the second quarter for a +9.3% year-on-year
rate vs. the second-quarter’s +7.7%.

Orders over the first half of the year at Daktronics (DAKT), which
makes large electronic displays, were strongest from its commercial and
transportation customers: “It appears that the business units that
turned down first with the economic decline are the first to show signs
of recovery.” Based on backlog, the company sees sequential sales gains
ahead.

Year-on-year order growth at fume-scrubber products maker Met-Pro
(MPR) is in the mid-single digits and is ahead of sales growth while
backlogs are up 35%. The company, unable to close on large projects
despite rising quote activity, has been relying completely on small
projects.

In contrast, lab-furniture maker Kewaunee Scientific (KEQU) has
been relying entirely on large projects, saying funding for small and
mid-sized projects continues to be most affected by the economic
slowdown.

Equipment financing remains an issue for many customers of
manufacturing-systems maker Gerber Scientific (GRB) where sales have
slowed but are still in the double digits. The company reports
significant acceleration in its Chinese market.

Incremental growth in the aerospace sector, tied in large part to
progress on the Boeing 787, is a pivotal issue for the capital-goods
group. Boeing’s six-week delivery push-out to the middle of the first
quarter is likely to slow recovery. Most aerospace firms have been
looking for moderate and sustainable growth ahead.

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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