Pump Market Analysis
by Jordan, Knauff & Company
November 4, 2019

The Jordan, Knauff & Company (JKC) Valve Stock Index was down 14.9 percent over the last 12 months, while the broader S&P 500 Index was up 1.8 percent. The JKC Pump Stock Index fell 12.3 percent for the same time.1

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) September reading registered 47.8 percent, a decrease of 1.3 percentage points from August. September was the second consecutive month of PMI contraction, and at 47.8 percent, the ISM manufacturing index is now at its lowest level this business cycle, including the 2015-2016 slowdown.

Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July. Of the 18 manufacturing industries surveyed, only three reported growth: miscellaneous manufacturing; food, beverage and tobacco products; and chemical products.

image 1 stock indicesImage 1. Stock Indices from October 1, 2018 to September 30, 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.

Although still below the neutral mark of 50 percent, the J.P. Morgan Global Manufacturing PMI rose for the second month to 49.7 percent. National PMI data signaled deteriorations in overall business conditions in 15 of the countries covered. Japan saw further contraction while the rate of decline in the Eurozone was the fastest in almost seven years, mainly due to a sharp deterioration in Germany’s performance. The trend in international trade flows also remained weak, as new export orders declined for the 13th consecutive month. The U.S., China, Germany and Japan were among the many nations to report a decrease in new export business.

According to the U.S. Energy Information Administration, the share of U.S. total utility-scale electricity generation from natural gas-fired power plants is expected to rise from 34 percent in 2018 to 37 percent in 2019 and 38 percent in 2020. The share of U.S. generation from coal is forecast to average 25 percent in 2019 and 22 percent in 2020, down from 28 percent last year.

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

The nuclear share of U.S. generation will remain at approximately 20 percent in 2019 and in 2020. Similar to last year, the hydropower share will remain at approximately 7 percent this year and next. Wind, solar, and other non-hydropower renewables together provided 10 percent of U.S. total utility-scale generation in 2018. It is expected they will provide 10 percent in 2019 and 12 percent in 2020.

On Wall Street, the Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite gained 2.0 percent, 1.7 percent and 0.5 percent, respectively in September. The first half of the month was encouraged by a second interest rate cut by the Federal Reserve Bank. However, volatility erupted in the second half due to trade tensions and possible impeachment proceedings of the U.S. president.

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

For the third quarter, the Dow Jones Industrial Average and the S&P 500 Index gained 1.2 percent each while the NASDAQ Composite was down 0.1 percent.

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.