Redburn experts see the European short-cycle, July slight improvement versus June
The July PTM Index highlights that daily European short-cycle industrial demand (including bearings, motors and drives) tracked sideways in July MoM compared to June and the rate of YoY decline in July only slightly improved compared to the YoY in June. This is similar to Redburn’s scenario, but perhaps a little worse than they had hoped for.
Adjusting for working days, analysts calculate that mechanical power transmission orders (the simple average of all surveyed manufacturers and distributors combined) fell 18% YoY in July (in line with the -18% seen in June). Sales, calculated on the same basis, fell 15% YoY (300bp better than the -18% seen in June). Inventories, calculated on the same basis, fell 8% YoY in July.
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, 19 August) and implying +10% QoQ organic development (but still leaving us 16% below the last peak of 3Q18). While Europe is not improving quite as fast as we might have hoped, US and Chinese industrial short-cycle trends seem to have developed more favorably in July.
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