By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index rose more than two
points to 64.8 in the July 2 period for the strongest reading of the
recovery, according to the results of Market News International’s weekly
survey.

Sales are a year-on-year +12.8%, just off last week’s recovery high
though the four-week average, at +12.2%, is up for the seventh week in a
row. Income is very strong at +35%. Sample size is 88 companies.

The results point to another strong month of acceleration for the
government’s capital goods data. Last week’s factory order report shows
strong upward revisions to capital goods led by a 1.6% upward revision
for May nondefense capital goods orders.

For shipments, even if June comes in no better than May,
quarter-to-quarter growth for nondefense capital goods will come in at
+2.6% for the best rate of the recovery. Year-on-year, the results would
show the recovery’s first increase, at +7.1%.

The nondefense capital goods category, over time, has tracked very
closely with total durable goods and, as an indicator, has outdone the
ex-aircraft category which, in a bad head fake, continued to accelerate
early on in the recession.

Belying the sample’s strength, warnings dominated the week’s
commentary in a reminder that some companies, especially those tied to
non-residential construction, continue to struggle.

Lighting maker Acuity Brands (AYI) is warning that non-residential
construction may continue to decline, not only for the balance of the
year, but next year as well.

Shnitzer Steel (SCHN) reports prices for ferrous scrap have dropped
sharply in recent weeks and the company expects margins at its recycling
business to be significantly lower in its August quarter. For its
manufacturing business, the company describes market demand as weak.

Infrastructure stimulus has helped Lindsay (LNN) but, in comments
heard repeatedly over the past couple months, the company is warning
that Congressional passage of a multi-year highway bill is essential for
sustainable growth in its road-safety products 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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