Demand for Industrial Equipment Improved Moderately in June-July

July 18, 2008
However in general market remains depressed.

Due to a continued spike in input costs, which industrial distributors are aggressively attempting to pass through to customers, the general market for industrial equipment is very sluggish. According to survey released on July 18 from Longbow Research demand was moderately positive, likely due to seasonal and geographic factors within the sample, but remains at depressed levels and below May levels. The research shows that the outlook remains cautious with near-term uncertainty given anecdotal evidence of softening of demand over the summer.

"Demand improved moderately in the June-July timeframe; responses indicating higher year-over-year demand rebounded modestly to 23% in June-July versus 16% in May, 34% in April, and 50% in FebruaryMarch," explained Eli Lustgarten, analyst at Longbow Research.

Companies reporting flat demand moderated somewhat to 39% from 45% in May compared to 38% in April and 44% in February-March. Companies that reported declining sales remained flat at 39% in June, unchanged from May versus 28% in April and 6% in February-March.

Lustgarten points out that input costs continued to spike in an environment of increasing raw material prices and 97% of contacts (vs. 100% in May, 97% in April, 100% in February-March, and 94% in December-January) saw price increases. He said price increases continue to shift upward to higher ranges; 10% responses rose to 48% from 40% in May, 24% in April, 20% February-March, and 9% in December-January. About 3% of the companies reported flat pricing in the June/July survey versus none in May, inline with trends seen over the past several surveys.

The study showed that imported parts purchases (primarily from emerging markets such as China, India, and Eastern Europe) increased modestly in June-July after they flattened out in May. "Rising ocean freight and emerging market currencies may begin to limit the benefit to both customers and distributors form switching to imported products," Lustgarten said.

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