Pump Market Analysis
by Jordan, Knauff & Company
May 20, 2019

The Jordan, Knauff & Company (JKC) Valve Stock Index was down 2.9 percent over the last 12 months, while the broader S&P 500 Index was up 9 percent. The JKC Pump Stock Index fell 9.9 percent for the same time period.1

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) increased 1.1 percentage points to 55.3 percent in March. Comments from the survey panel reflected expanding business strength supported by gains in new orders and employment. The New Orders Index gained 1.9 percentage points rising to 57.4 percent, while the Employment Index gained 5.2 percentage points reaching 57.5 percent. The Export Orders Index fell to 51.7 percent, its lowest level in two and a half years.

Growth of global manufacturing production remained weak in March according to the latest J.P. Morgan Global Manufacturing PMI. With a reading of 50.6 percent, the index was unchanged from February and is slightly above the neutral 50 percent mark. Overall, new orders stagnated and international trade flows declined. On a regional basis, PMI readings were above 50 percent in China, the United States, Brazil and the United Kingdom. Below 50 percent readings were seen in the Eurozone, Japan and South Korea. March saw a modest increase in global manufacturing employment, with staffing levels rising in China, the U.S., the Eurozone, Japan, Brazil and the U.K.

Stock indices from April 1, 2018, to March 31, 2019Image 1. Stock indices from April 1, 2018, to March 31, 2019. 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.

U.S. natural gas consumption increased by 10 percent in 2018. The electric power sector accounted for 35 percent of total domestic use, with industrial accounting for 28 percent, residential 17 percent, commercial 12 percent and other uses at 9 percent.

U.S. refinery runs (gross inputs to petroleum refineries) averaged 17.3 million barrels per day in 2018, the highest annual average on record and the fifth consecutive year of record-high levels.

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

U.S. refinery runs are expected to be relatively flat in 2019 and then reach a new record of 17.8 million barrels per day in 2020. Refinery usage as a percentage of operable capacity averaged 93.2 percent in 2018, an increase of 2.1 percent from 2017.

Instead of running at higher usage rates, refineries have increased capacity by 783,000 barrels per calendar day between December 2013 and 2018.

U.S. PMI and manufacturing shipmentsImage 3. U.S. PMI and manufacturing shipments. Source: Institute for Supply Management Manufacturing Report on Business and U.S. Census Bureau

On Wall Street, the Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite gained 0.1 percent, 1.8 percent and 2.6 percent, respectively, in March. Positive developments on the trade war with China and the Federal Reserve Bank’s decision to keep interest rates unchanged were major issues for the markets. For the quarter, the Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite rallied 11.2 percent, 13.1 percent and 16.5 percent, marking the S&P 500 Index’s best quarterly rise since the third quarter of 2009.

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

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.