Third-quarter earnings confirmed
the worst-case scenario — plunging oil prices are whacking almost the entire industrial sector. The theme is hardly new, as the pattern of our headlines has revealed over the past fifteen or so months:
Third-quarter earnings are confirming the worst-case scenario, i.e. — not only are energy related end markets in a downturn, but conditions continue to worsen.
We anticipate no substantive improvement in manufacturing activity.
Not in the U.S. or internationally.
If anything, headwinds may have
become slightly more pronounced
because a U.S. — Iran “deal” that everybody hates except a) the Iranian
government and b) the Obama administration will result in the release of Iranian oil supply back onto the global market. Oil had rallied from about $50 to $60 over the past month (I like round numbers), but has since roundtripped.
Expect further, deeper capital
spending cuts in the U.S. oil sector to continue affecting demand for large
capital equipment.
First quarter results confirmed our
view. Capital expenditures are being
slashed in the oil sector, the stronger U.S. dollar is enabling Japanese machinery competitors to gain share in the Middle East and Latin America, and lower soft commodity prices translate into a continuing North American decline in demand for farm equipment.
