By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods indicator fell 2.3 points
in the Nov. 9 period to 40.0 and is further below 50 to indicate
deepening contraction in year-on-year business activity, according to
the results of MNI’s weekly survey released Tuesday.

The year-on-year indication first fell below 50 in the second
quarter and the latest reading represents the most severe contraction of
the recovery.

Year-on-year sales growth in the period’s 495-company sample is
-0.1% which is the first negative reading of the recovery. Export sales
are getting a three percentage point shave from currency effects.

Aircraft is giving a slight lift to the sample where the
ex-aircraft indicator is at 38.8 with sales at -0.6%.

Quarter-to-quarter guidance from both the total sample and the
ex-aircraft group point to -1% for fourth quarter sales.

Year-on-year income growth for the total sample is zero and is at
-2.0% ex-aircraft.

The theme of the commentary is lack of customer confidence which is
forcing an increasing number of the sample to cut back on their own
capital investment.

Many see weakness in global infrastructure and capital spending
extending into the new year. Many specifically report weakness in
exports.

Declines are widespread in telecom infrastructure and especially
alternative energy.

Many across industries are reporting destocking in the supply
chain. Also, backlogs for many are not the center of strength they used
to be.

The need to cut costs is a central topic and the need to “right
size” payrolls is reappearing.

On the positive side, non-residential construction appears to
picking up slightly based on the sample’s comments while the oil and gas
sector is still positive.

Electronics, despite continued contraction, looks to get a boost at
the beginning of the year from easy comparisons tied to the Thailand
floods early this year.

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

** MNI New York Bureau: 212-669-6430 **

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