By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index is little changed
in the June 24 period at 72.1, well over 50 to indicate very strong
growth in year-on-year business conditions but slightly below trend to
indicate the risk of slowing growth, according to the results of Market
News International’s weekly survey released Monday.

Sales, at a year-on-year +14.6%, are slightly below April and May
but are slightly above levels in the first quarter. Currency benefits
are an increasing positive, adding three percentage points to export
sales.

Income is slowing, at a year-on-year +19% and is trending more than
10 percentage points below the first quarter in a signal of possible
trouble for the second-quarter earnings season. Sample size in the
latest period is 156 companies.

The good news is last week’s durable goods report which is very
positive for the quarter-to-quarter outlook. If shipments in June do no
better than match May, which isn’t that hard given the strength in
backlogs, the non-defense capital goods component will show a sequential
gain of 1.6% in what would be the best performance since third quarter
last year.

But the tone of company news isn’t that great. Warnings, which were
heavy in the prior week, did ease in the current week but there’s a
telling absence so far of positive pre-announcements.

Kewaunee Scientific (KEQU) reports continued weakness for small and
mid-sized laboratory projects which it said remain well below
pre-recession levels and which have yet to show any noticeable
improvement. The company reports lower selling prices, construction
delays, and higher input costs though it does see steel prices trending
lower.

Lower demand and resulting overcapacity in the solar supply chain
are badly hurting solar-products maker STR Holdings (STRI) which reports
a broad-based, non-customer specific slowdown.

Losses continue for Apogee (APOG) which reports low prices for
architectural glass projects, low margins on installation projects, and
low capacity utilization. Backlog is however on the rise and the glass
maker sees sales growth trending at 10% on better volume and strength in
its storefront business.

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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