Industrials Squeal

Here’s a quote from the Wall Street Journal that encapsulates what it’s like to be an industrial company right now:

Quarterly profits and revenue at big American companies are poised to decline for the first time since the recession, as some industrial firms warn of a pullback in spending.

From railroads to manufacturers to energy producers, businesses say they are facing a protracted slowdown in production, sales and employment that will spill into next year. Some of them say they are already experiencing a downturn.

“The industrial environment’s in a recession. I don’t care what anybody says,” Daniel Florness, chief financial officer of Fastenal Co., told investors and analysts earlier this month.

Industrial stocks make up just shy of 10% of the US market by capitalization. When combined with Energy and Materials, we’re talking 20% or one fifth. This is the fifth of the market that has very little good to say these days. The strong dollar is nailing the revenue line down for these businesses where they transact globally. The sluggishness of the real-world economy is keeping a lid on growth. The fall of commodity prices is putting large-scale projects on hold and depressing profitability.

It’s bizarre to see a scenario where money can be borrowed for next to nothing and so few corporations have enough demand growth to take advantage of it.

But here we are. If you’re not in information technology, media or health care, it probably feels like a recession.

Source:

U.S. Companies Warn of Slowing Economy (Wall Street Journal)