ACP Pubs

Tom Hale

Positive Signs In Negative Economy
April 28, 2008

It is very easy to complain about the economy -- just look at the jump in gasoline and diesel fuel prices and the increased price of food at your local supermarket. We've been down this road before.

The producer price indexes for March, reported by the Bureau of Labor Statistics, show inputs to construction industries -- materials used in all types of construction plus items consumed by contractors, such as diesel fuel -- soared 2.1 percent in March alone. Ken Simonson, chief economist for The Associated General Contractors of America, says, "That jump was propelled by a staggering 24-percent increase in diesel fuel costs and a 5.5-percent rise in prices for steel mill products."

The stats are bad and might get worse. But I prefer to put a positive spin on things, and point out a few bright spots in the construction industry -- specifically good news reported by three of the top equipment manufacturers.

For those fortunate to have Caterpillar Inc. stock, the company recently reported a record first-quarter profit per share of $1.45, an 18 percent increase from $1.23 per share in the first quarter of 2007. Sales and revenues of $11.796 billion were also a first-quarter record and 18 percent higher than 2007 first-quarter sales and revenues of $10.016 billion, according to Caterpillar.

Caterpillar Chairman and Chief Executive Officer Jim Owens sees "robust  demand for products used in the global mining and energy industries and for machines used by our customers to build infrastructure, particularly in emerging markets."

On April 2, Deere & Co. announced plans to significantly expand its presence in Russia. The company said it has signed an agreement with the Russian government and local authorities to invest approximately $80 million in a central operations center, which includes a distribution, replacement parts and training facility in an area 38 miles southwest of Moscow.

This news follows a February announcement by Deere that its construction, agricultural and forestry sectors were strong. The company reported a worldwide net income of $369.1 million for the first quarter of this year, compared to $238.7 million for the same period last year. Worldwide net sales and revenues rose 18 percent to $5.201 billion for the quarter, compared with $4.42 billion a year ago.

The first quarter of 2008 saw the total world market for construction equipment within Volvo Construction Equipment's product range remain at historically high levels. According to Volvo CE, the results of recent acquisitions and cost efficiency initiatives were positive, with both sales and income increasing by 38 percent over the same period in 2007.

So, hidden amongst all the negative news are some positive signs.

Posted by Tom Hale on April 28, 2008 | Comments (0)