What CEOs Said Last Week: "The global industrial economy is enjoying a broad based boom"

What CEOs Said Last Week: "The global industrial economy is enjoying a broad based boom"




by Scott Krisiloff, CIO, Avondale Asset Management

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

It’s increasingly obvious from conference calls that inflation pressures are building in the economy. Management teams in a wide variety of industries are talking about rising input costs and a “very, very positive pricing environment” in 2018. For whatever reason, securities prices suggest that most people don’t believe that the inflation will sustain itself, but at some point the weight of the anecdotal evidence should make its way into economic figures. If that surprises the market and policy makers, there could be a very significant reaction.

Note: raw quotes are now being posted to a streaming feed on tumblr and twitter (@avondaleam)

The Macro Outlook:

The global industrial economy is enjoying a broad based boom

“we’re seeing broad-based sales increases across a number of industries in all regions. We continue to see strength in China construction. Onshore oil and gas in North America is also strong. Construction activity in North America was up compared to last year, and we’re seeing increased order activity by mining customers.” —Caterpillar (Construction Equipment)

“Industrial demand remains strong…I would say that certainly the demand was broad based. If you look across our product lines, we’ve got 65 to 70 different product lines, and the demand was very strong across those as well as strong across the region. So we had revenue up in three of the four regions year on year in Europe, Asia and the U.S., and it was about even in Japan.” —Texas Instruments (Semiconductors)

“clearly we’re seeing clients starting more new projects. They’re spending more money. They have more sense of urgency. Their existing staff has a lean because they’ve held a line so far during this recovery. So, there’s some pent up demand that results from that.” —Robert Half (Temp Staffing)

Even the mining cycle has started to turn

“As we have stated previously, the mining cycle has started to turn. The parked fleet has come down from its peak and stabilized for several months” —Caterpillar (Industrial Equipment)

But commodity inflation is becoming more obvious

“I mean obviously we’re in a bit of an inflationary environment for some of the commodities…overall we’ve probably been more challenged on the cost side this year than we’ve seen in a while.” —Honeywell (Industrial)

“The core underlying market we’re facing for raw materials is certainly toughening.” —3M (Industrial)

“our commodity inflation estimate has increased somewhat from 3 months ago… In terms of the inflationary pressures that we see…it is stronger inflation than we were expecting” —Kimberly Clark (CPG)

“Lumber was on an upward trend even before some of the catastrophic natural disaster events that we’ve seen over the last 60 to 90 days. So that’s the one that I think we all need to be paying attention to for 2018. I think the premiums that are being paid for labor in Houston and Florida that will subside in time. the lumber impacts could be longer lasting.” —Pulte Home (Homebuilder)

“We knew we’d see higher pulp cost going into year, these costs have continue to increase beyond initial forecast ranges. Ethylene, propylene, kerosene, and the polyethylene and polypropylene resins have increased recently” –Procter and Gamble (CPG)

Even oil prices could start to rise

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