Caterpillar is widely seen as a barometer of the health of the various segment of the U.S. economy. The company's guidance can be as valuable as what an economist say. Interestingly, the company's CEO Jim Owens has a doctorate in economics. Caterpillar said in the press release that more interest rate cuts from the Fed "will be needed to move economic growth to nearer the economy's potential." However, the company doesn't expect the cuts to benefit substantially the industries the company serves in 2008.It pegs U.S. economic growth at about 2% this year and 1.5% in 2008.
The company also lowered its earnings outlook for the year, citing weakness in several key industries such as:
a. Housing
b. Non residential construction
c. Coal mining
d. Trucking- There is a significant decline in the demand for new trucks amid a reduction in tonnage hauled and freight rates
For now, sluggishness in the U.S. is offset by strength in emerging economies partucularly in several key industries such as:
a. Mining
b. Oil and gas
c. Electric power
d. Marine engines
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