European short-cycle, August improves versus July
The August 2020 European short-cycle proprietary data set (the Redburn PTMI) highlights that while the absolute demand picture remains challenged, daily European short-cycle industrial demand (including bearings, motors and drives) improved somewhat in August versus July for both distributors and manufacturers. Encouragingly, MoM distributor orders (which should be the first to see real recovery) improved clearly.
To be more specific, adjusting for working days, Redburn analysts calculate that mechanical power transmission orders (the simple average of all surveyed manufacturers and distributors combined) fell 8% YoY in August (a clear improvement on the -18% seen in July). Sales, calculated on the same basis, fell 12% YoY (300bp better than the -15% seen in July). Inventories, calculated on the same basis, fell 8% YoY in August.
Turning from European short-cycle to Global short-cycle, we forecast a 10% organic sales decline in 3Q20 for our covered short-cycle companies (vs -18% in 2Q), putting us 100bp above the current -11% consensus (based on Visible Alpha, 13 September). While the forecasts are the equivalent of a +10% QoQ organic development versus 2Q20, this will still leave 3Q20 demand some 16% below the last peak (in 3Q18). For the US, we note that Fastenal (the US manufacturing distributor) reported [US] manufacturing daily sales YoY of -5.0% in August vs -5.5% in July, a marginal improvement. For China, Airtac (the Chinese manufacturer of control valves and actuators) reported August sales up 37% YoY vs +41% in July (ex. working days); the equivalent to a SAAR that was +9% MoM and +7% vs last three-month moving average.
For a detailed analysis of Orders, Revenues and Inventory changes, and future projections, join the EPTDA PTMI Program by contacting firstname.lastname@example.org or email@example.com. The data is exclusive to members who contribute to the index.