By Mark Pender

NEW YORK (MNI) – Third-quarter guidance pulled MNI’s U.S. capital
goods index down more than three points to 56.4, pointing to slowing
growth for the industrial sector, according to the results of Market
News International’s weekly survey.

On-year sales of +8.0% are the slowest since May. Income is also
slowing, at +13.0% for its lowest level since March.

The warning season has torpedoed the sample, sending the index down
12 points in two weeks. Though pre-announcements point to
disappointment, the number of companies making pre-announcements is
light, evidenced by the period’s very small 78 sample size.

Last week’s durable goods report wasn’t all positive. Shipments
exceeded new orders for a second month in a row, an ominous cycle first
for the nondefense capital goods group.

Yet excluding aircraft, the data show strength with new orders out
in front of shipments for four months in a row.

Aircraft shipments at an on-year +8% are, for now, lagging the
ex-aircraft group where growth is +13%. Yet growth for the aircraft
group looks to accelerate given rising output at Boeing, underlined in
the week by a run of new order announcements. Aircraft shipments make up
7% of all capital goods shipments.

Steel makers are raising prices. The up-and-down group is one of
the strongest of the sample. A highlight of the durable goods report was
a 2.4% jump in new orders for primary metals.

Watch for comments on Thursday from MSC Industrial (MSCI), a steel
service center that often gives detailed commentary on the steel sector.
Processor and fabricator Worthington Steel (WOR) will talk about its
results on Wednesday.

Rising demand from construction and mining is “real and
sustainable,” according to Hawk Corp (HWK) which makes industrial
braking materials. The company’s 40% growth is tied in part to China,
India and Russia.

Exports have been a big plus for the industrial sector but don’t
expect the August trade report to show another jump. Last week’s
shipments data, specifically for total capital goods, fell back nearly
one percent. The drop points to export disappointment and is a reminder
that signs of slowing are increasing in number.

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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