By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index rose four points in
the July 23 period to a 67.9 level that indicates strong year-on-year
gains and points to strong month-on-month gains for related components
in Wednesday’s durables goods report, according to the results of Market
News International’s weekly survey.

Sales are at a year-on-year +13.0% and show convincing depth
through the 190 company sample as 55% show 10%-plus gains against only
7% showing 10% declines. Foreign exchange is having zero year-on-year
effect on export sales vs. the first quarter’s +3.0% effect. Income is
+33%.

Wednesday’s durable goods report, based on this sample, is very
likely to show quarter-to-quarter strength for nondefense capital goods
shipments. Even if June does no better than May, quarter-to-quarter
shipments will be up 2.6% with the year-on-year rate, at +7.1%, showing
its first positive reading since second-quarter 2008.

But this sample is pointing to more than just a flat month for
June, rather a very strong month on the order of March’s 2.5% gain.
Strong unfilled orders are giving the sample confidence and are giving a
boost to guidance.

Asian-centered demand, especially for electronics, is the sample’s
central strength. Amphenol (APH), which makes electronic connectors,
reports continued proliferation of new electronics in all its end
markets.

Truck-parts maker Eaton (ETN) is reporting accelerating domestic
demand fed by freight growth and an aging truck fleet. They see the
North American truck market rising 23% this year.

Yet heavy-truck dealer Rush Enterprises (RUSHA) warns that fleets
are reluctant to take delivery of new trucks not only because of
economic uncertainty but also because of 2010 emission-compliant
engines, which are higher priced.

On the whole, the sample’s numbers are better than the comments.
Below are a run of warnings.

Though Steel Dynamics (STLD) sees steady demand ahead overall, it
warns of continued weakness in structural steel. The company’s related
mill is running at less than 40% of capacity.

Insteel Industries (IIIN), which makes wire-reinforcing products,
warns that nonresidential construction will remain depressed until job
growth picks up. The company also reports a lack of credit for
commercial projects.

Aerospace-parts maker Ladish (LDSH) sees customer demand as no
better than flat over the next few months. They describe demand for jet
engines as inconsistent.

Road-equipment maker Astec Industries (ASTE) said customers are
only purchasing equipment needed for current jobs. The company said its
customers are delaying major capital expenditures until Congress passes
a new six-year highway bill.

Uncertainty is the theme for copper tube & valve maker Mueller
Industries (MLI): “Looming foreclosures, weak jobs reports, an
environment of higher taxes, and rising federal deficits are causing
widespread anxiety.”

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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