by Agnel Philip
Long seen as a bellwether for global growth thanks to its exposure to multiple industries, Caterpillar's earnings announcement on Tuesday reinforced the view that the international economic expansion is the most synchronized since the start of the decade.
"We've got pretty good economic growth all over the world," David Solomon, president of Goldman Sachs Group Inc., told Bloomberg Television on Tuesday. "The expectation for growth was not as strong as growth has actually come in."
The Deerfield, Illinois-based company projected 2017 sales of $44 billion, marking a third straight increase in annual revenue forecasts. But what stood out was the breadth of demand for its products.
Sales surged 27% in North America as the U.S. oil and gas industry cranked up, while China's growing construction market helped sales in the Asia Pacific region balloon 31%. Dealers' replenishing of inventories boosted sales in Europe, Africa and the Middle East by 22% and "stabilizing economic conditions" in Latin America lifted sales by 24%.
"There's almost always a fairly tight correspondence between growth in the economy at large and in the manufacturing subset," said David Hensley, director of global economics at JPMorgan Chase & Co. in New York. "We're looking at, in GDP terms, some of the best growth of the entire expansion in recent quarters."
All told, Caterpillar reinforced the International Monetary Fund's move earlier this month to raise its forecasts for global growth this year and next, as three-quarters of the world is now expanding.
That's good news at a time when the Federal Reserve and other central banks are starting to pull back on emergency monetary stimulus yet don't want to choke demand.
A weakening dollar and increased momentum in global markets have led U.S. manufacturing to a strong earnings season so far with some of the industry's largest players showing greater revenue and improved outlooks.
3M Co.'s third-quarter earnings on Tuesday beat the highest analyst estimate, and the company increased its projected profit for the year. United Technologies Corp. also raised its profit forecast amid strength in demand for jet engines.
Orders for business equipment in the U.S. have also been increasing in recent months, which probably helped boost third-quarter growth. The Commerce Department will release September figures on Wednesday for capital-goods orders, and Friday will bring gross domestic product for the July-September period.
Even during a period when hurricanes hurt American businesses and consumer activity in the South, the world's largest economy probably expanded at a 2.5% annual pace last quarter, according to the median estimate of analysts surveyed by Bloomberg. Some economists have been raising their forecasts for third-quarter growth in recent days.
In Europe, factories are humming as well. A gauge for manufacturing rose this month to the highest level in more than six years, IHS Markit said on Tuesday.