By Mark Pender

NEW YORK (MNI) – MNI’s U.S. capital goods index bounced back a
sharp 3.6 points in the July 22 period to 70.0, well over 50 to indicate
very strong growth in year-on-year business conditions and back near
trend to indicate accelerating growth, according to the results of
Market News International’s weekly survey released Monday.

But the gain in general conditions is not confirmed by sales where
growth slowed 1.4 percentage points to a year-on-year +12.7%.

Foreign exchange is a major plus for the sample which is reporting
a 4% benefit on export sales.

Income remains on the soft side, steady at a 10-month low of +13%.
Sample size in the period is 225 companies.

Non-defense capital goods shipments, given prior strength in both
new orders and backlogs, are likely to show a gain for June. Even no
gain would put quarter-to-quarter shipments at +1.9% for the strongest
rate since the third quarter. The government will release the durable
goods report on Wednesday.

Hubbell (HUBB), which makes electrical systems, expects strong
demand for renovation and relighting products to help offset what it
sees as continuing contraction for new non-residential construction. For
the utility market, it sees rising spending on transmission projects.

Badger Meter (BMI) warns that concerns about potential spending
reductions have slowed the decision-making process for some
municipalities.

Hit by constraints at the municipal and state level as well as by
the absence of federal transportation funding, Insteel Industries
(IIIN), which makes wire reinforcing products, offers a measure of
weakness in the road sector. June-quarter capacity utilization at the
company was only 48% vs 52% in the prior quarter and 46% in the year-ago
quarter.

MKS Instruments (MKSI) reports softening in the semiconductor
market as strong shipments in prior quarters are assimilated and brought
on line. After a strong run, the company now sees sequential and
year-on-year sales rates turning negative.

Chip-tool maker Cohu (COHU) said some customers have recently
become more cautious amid reports of slowing sales and growing
inventories.

Backlogs are an increasing positive for many in the sample
including crane & hoist maker Columbus McKinnon (CMC) where sequential
backlogs rose 11% in the second quarter to $99 million. Machinery
backlogs in durable goods data, which includes cranes & hoists, are
trending at a 9% sequential gain with the non-defense capital goods
group as a whole trending at a more modest 3% gain.

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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