By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index rose two tenths to
72.3 in the March 11 period, above 50 to indicate year-on-year growth
and near the top end of trend to indicate accelerating growth, according
to the results of Market News International’s weekly survey released
Monday.

The pass through of high input costs is, based on commentary,
giving only small boost to sales which are a year-on-year +13.6%. The
four-week average of +13.4% is the highest this year.

Currency effects are shaving one percentage point from export sales
though some companies are now reporting a small positive effect.

Income is strong at +30%. Sample size in the period is 312
companies.

Year-on-year, MNI’s data point to low double-digit growth for
nondefense capital goods shipments. Quarter-to-quarter, the data point
to low single-digit growth.

Month-to-month, the data point to gains for capital goods readings
in Thursday’s industrial production report for February where the
business equipment index, for the past nine months, has been posting low
double-digit year-on-year gains.

Company after company are pointing to strong backlogs as a positive
indicator for 2011.

Metal-products maker NCI Building Systems (NCS) is confident that
year-on-year backlog growth of 27% in its January quarter and sequential
backlog growth of 6% are strong indicators for significant improvement
ahead, especially for its May-to-October period.

Sales in 2010 contracted slightly for HVAC maker AAON Inc (AAON)
which isn’t bad given a mid-teen decline for its non-residential
markets. The company’s backlog, at $38.4 million, is up 19% from a year
ago.

Unusual fourth-quarter momentum has extended so far into the first
quarter for valve maker Sun Hydraulics (SNHY), which sees first-quarter
year-on-year sales growth at 58% vs. fourth-quarter growth of 53%.
Benefiting from new global customers, the company said mining and
construction appear to be gaining strength.

Steel maker Steel Dynamics (STLD) reports increased demand from its
rail customers as does KMG Chemicals (KMGB), which produces wood
treatments for tail ties. KMG expects continued strong sales volumes
over the next six months.

Cost pass through is of increasing concern to the sample. Dixie
Group (DXYN) has raised carpet prices for both its residential and
commercial products.

Nortech Systems (NSYS), an electronics manufacturing contractor,
warns that competitive pressures and excess capacity are making pass
through difficult.

Purchase activity is accelerating at Graham (GHM), a maker of
vacuum & heat transfer equipment which announced several new orders to
the energy sector. Yet it cites sociopolitical uncertainty as a negative
and expects quarterly growth to be erratic.

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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