Pump Market Analysis
by Jordan, Knauff & Company
September 13, 2019

The Jordan, Knauff & Company (JKC) Valve Stock Index was down 7.6 percent over the last 12 months, while the broader S&P 500 index was up 5.9 percent. The JKC pump stock index fell 8.6 percent for the same time period.1

The Institute for Supply Management’s purchasing managers’ index (PMI) registered 51.2 percent in July, a decrease of 0.5 percentage points from the June reading of 51.7 percent, falling for a fourth consecutive month. The new orders index registered 50.8 percent, an increase of 0.8 percentage points from the June reading. The production index fell more than three points to 50.8 percent, its lowest level since 2016. As growth overseas continues to struggle, export orders turned negative again in July. At 48.1 percent, the index is at its lowest level since early 2016.

image 1 stock indicesImage 1. Stock Indices from Aug. 1, 2018 to July 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.

The U.S. economy added 164,000 jobs in July. The unemployment rate remained at 3.7 percent, which marks the 17th straight month that it has been at or below 4 percent. The pace of hiring slowed to an average of 140,000 new jobs per month over the past three months, down from an 187,000-per-month rate over the past year. Manufacturing added 16,000 jobs in July, while the number of hours that factory workers worked in a week declined to its lowest level since 2011.

The U.S. gross domestic product (GDP) grew at a 2.1 percent annual rate in the second quarter of the year, compared to a 3.1 percent gain in the first three months of the year. Consumer spending jumped 4.3 percent after a small 1.1 percent gain in the first quarter. Fixed business investment fell 0.8 percent, the largest drop in three and a half years. Investment fell almost 11 percent on structures such as office buildings, manufacturing plants and drilling rigs. Equipment spending rose less than 1 percent. Government spending climbed 5 percent, while exports fell 5.2 percent.

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

U.S. crude oil refinery capacity reached a record high at the beginning of 2019. As of the beginning of January, U.S. operable crude oil distillation capacity was 18.8 million barrels per calendar day (b/cd), an increase of 1.1 percent since the beginning of 2018, according to the U.S. Energy Information Administration. The previous high of 18.6 million b/cd was set at the beginning of 1981. U.S. annual operable crude oil distillation unit capacity has increased slightly in six of the past seven years.

On Wall Street, the Dow Jones Industrial Average gained 1.0 percent, the S&P 500 Index rose 1.3 percent and the NASDAQ Composite rose 2.1 percent. While the three major indexes witnessed new highs during the month, they lost momentum toward the end of the month.

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

Investors were expecting the Federal Reserve Bank to cut interest rates, and it did on the last day of the month. Second quarter corporate earnings met analyst expectations.

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.