Pump Market Analysis
by Jordan, Knauff & Company
February 14, 2018

The Jordan, Knauff & Company (JKC) Valve Stock Index was up 10.9 percent over the last twelve months, while the broader S&P 500 Index was up 18.4 percent. The JKC Pump Stock Index increased 3.7 percent for the same time period.1

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) reached its highest level in three months in December, rising to 59.7 percent from 58.2 percent in November. Faster growth was seen in new orders, rising to 69.4 percent (the fastest pace in 13 years) from 64.0 percent; production, increasing to 65.8 percent from 63.9 percent; and new export orders rising to 58.5 percent (a six month high) from 56.0 percent. Order backlogs increased a point to 56.0 percent.

Figure 1. Stock Indices from January 1, 2017Figure 1. Stock Indices from January 1, 2017 to December 31, 2017. Local currency converted to USD using historical spot rates. The JKC Pump and Valve Stock Indices include a select list of publicly traded companies involved in the pump and valve industries, weighted by market capitalization. Source: Capital IQ and JKC research.

The U.S. economy grew at its fastest pace in more than two years in the third quarter. U.S. gross domestic product (GDP) increased at an annual rate of 3.2 percent in the third quarter of 2017, according to the Bureau of Economic Analysis. In the second quarter, GDP increased 3.1 percent. The increase in GDP in the third quarter reflected positive contributions from personal consumption spending, private inventory investment, nonresidential fixed investment, exports, federal government spending and state and local government spending.

The Bureau of Labor Statistics reported that the U.S. economy added 148,000 jobs in December after averaging gains of 232,000 jobs in the prior two months. Health care added 31,000 jobs, construction added 30,000 and workers and manufacturers added 25,000 jobs. Retail employment declined by 20,000 jobs. U.S. job growth fell for the full year compared to 2016, falling to 2.1 million from 2.2 million. Key sectors compared to last year include: health care added 300,000 jobs in 2017 compared to 379,000 in 2016; construction employment rose by 210,000 in 2017 compared to 155,000 in 2016; and manufacturing increased by 196,000 after seeing little change in 2016.

Figure 2. U.S. energy consumption and rig countsFigure 2. U.S. energy consumption and rig counts. Source: U.S. Energy Information Administration and Baker Hughes Inc.

According to the U.S. Energy Information Administration, estimated U.S. natural gas demand on the first day of 2018 was 150.7 billion cubic feet, passing the previous single-day record set in 2014. Increased demand for heating due to extremely cold temperatures, greater exports of natural gas to Mexico, as well as higher consumption in the electric power and industrial sectors contributed to the record demand.

On Wall Street in December, the Dow Jones Industrial Average rose 1.8 percent, the S&P 500 Index increased 1.0 percent and the NASDAQ Composite grew 0.4 percent. For the year, the Dow, S&P 500 and NASDAQ grew 25.2 percent, 19.5 percent and 28.2 percent, respectively. The Dow and S&P 500 both increased for nine straight months. The recent passage of the tax bill and the third rate hike of the year provided a boost to the markets.

1 The S&P Return figures are provided by Capital IQ.

Figure 3. U.S. PMI and manufacturing shipmentsFigure 3. U.S. PMI and manufacturing shipments

These materials were prepared for informational purposes from sources that are believed to be reliable but which could change without notice. Jordan, Knauff & Company and Pumps & Systems shall not in any way be liable for claims relating to these materials and makes no warranties, express or implied, or representations as to their accuracy or completeness or for errors or omissions contained herein. This information is not intended to be construed as tax, legal or investment advice. These materials do not constitute an offer to buy or sell any financial security or participate in any investment offering or deployment of capital.