Caterpillar Crawls

Dictionary.com defines the word bellwether as a person or thing that assumes the leadership or forefront, as of a profession or industry. In my opinion, Caterpillar fits neatly into this definition. The company is a worldwide leader in the heavy equipment industry, making all kinds of machinery used in construction and mining.

When the economy is strong and businesses are expanding, Caterpillar cranks out giant earth-movers used in the construction of new buildings, housing developments, highways, and mines. But we are in a steep global recession and many companies are cutting back, so the need for the company's products has waned.

As a result, what CAT says provides us with clues to what we may see looking about six to nine months down the road. Unfortunately, there is not that much to be excited about.

Today the company cut its full-year revenue forecast, citing a weaker economic outlook and a high degree of economic uncertainty in the global economy. It added that it expects total global demand to decline about 1.3% in 2009 and remain in a recession for most of the year, making this the "worst year of global growth in the postwar period." Yikes!

If you are wondering about all the government stimulus plans set to take effect around the world, CAT pointed out that the timing and impact of all these measures make it difficult to forecast sales. Another words, when will the spending hit and what will governments buy?

One thing we have seen is a rebound in the price of copper - a key industrial metal. Many have credited stimulus spending out of China and some look to speculators who have been stepping back into the metal because they believe the worst of the global contraction is in the rear view mirror. But recent uncertainty in US data has put a lid on the copper rally for now.