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Comparing Manufacturing Declines – Analyst Blog

Source: http://www.zacks.com/stock/news/17576/Comparing+Manufacturing+Declines+-+Analyst+Blog
 Posted on Thursday, February 19th, 2009 | In Stocks to Watch
Contributed by: Dirk Van Dijk (http://www.zacks.com/) -

Highlights include Ingersoll Rand (IR), Dover (DOV), Emerson Electric (EMR) and Textron (TXT).

How does the decline of manufacturing this time compare to other downturns? Not very well.

The chart below (from http://www.econbrowser.com/archives/2009/02/industrial_prod_1.html) is very interesting. It shows the change in manufacturing output (the manufacturing component of industrial production) for each of the last 6 economic downturns. The dates shown are the year the downturn started, thus the current downturn is labeled 2007 since that is the official start of this recession. The vertical line is the official start of each recession.

This is done in log terms, so unless you are very much of a math lover, the Y axis will not mean much, but the relative size of the downturns is significant. The Chart shows that up until last summer, the decline was very mild. This was because we were having a bit of an export boom.

That has since come to an end, due to both the rebound in the dollar and every other economy in the world going off a cliff. Since then, the decline has been extremely swift and the total decline in manufacturing output is already the worst of any downturn.

The total decline in factory output since the recession started is 12.3%. However, the annualized rate of decline over the last 3 months is 31.7%. This is a very serious situation. Fortunately, manufacturing makes up a much smaller part of the economy than it did in any of the previous declines (pretty much true that it has been smaller in each successive recession).

This is not good news for any firm, but it is particularly bad for capital goods firms. If factories are idle, the last thing the owners want to do is expand capacity. Firms like Ingersoll Rand (IR), Dover (DOV), Emerson Electric (EMR) and Textron (TXT) are examples of the sorts of firms that are hurt by the downturn in industrial production.

Read the full analyst report on IR

Read the full analyst report on DOV

“TXT” Free Stock Analysis: Buy? Sell? Hold?
“DOV” Free Stock Analysis: Buy? Sell? Hold?
“IR” Free Stock Analysis: Buy? Sell? Hold?
“EMR” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Last 5 posts by Dirk Van Dijk
About Dirk Van Dijk (http://www.zacks.com/)
Dirk Van Dijk is a Senior Analyst at Zacks Investment Research. He writes the Earnings Trends article on Zacks.com which provides investors with an in-depth analysis of the markets, along with the profit performance of S&P 500 companies. Each week, this report identifies which S&P 500 sectors are showing strength and which are showing weakness. In addition, this valuable report highlights the most attractive sectors based on valuation and projected earnings growth. For more information, visit www.zacks.com or for the RSS Feed of this article: http://www.zacks.com/external/rss.php?f=34

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