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Manufacturing Conditions

10/26/2011

Last week, Caterpillar CEO Doug Oberhelman’s post-earnings comments shed light on global manufacturing conditions. In defiance of an impending recession, his comments suggest manufacturing conditions remain favorable.
 
Some of his comments:
•   “not seeing cancellations, delays in mining orders”
•   “coal, copper, gold mining companies expanding”
•   “miners indicating they will keep investing”
•   “developed world driver is machine replacement”
•   “China market will need more capacity”
 
This morning, further supportive evidence was released in the U.S. Durable Goods data:
 
•   Durable Goods Orders ex-Transportation rose 1.7%, beating estimates for a modest 0.4% rise.
•   The 1.7% rise is the biggest monthly jump since March (Figure 1.1).
•   Orders for Non-Defense Capital Goods (an excellent measure of business investment) rose 2.4%, beating estimates for a modest 0.5% rise.
•   The 2.4% rise is the biggest monthly jump since March (Figure 1.2).
 
The market now awaits tomorrow morning’s U.S. Q3 GDP release. Expectations have risen over the past few weeks, with estimates moving higher from sub-2% to a now 2.5% consensus, an improvement on Q2’s 1.3%.
 
Figure 1.1 Durable Goods Orders Ex-Transportation

Source: Bloomberg
 
Figure 1.2 Capital Goods New Orders Non-Defense

Source: Bloomberg

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