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Analysis | Industrials' Long Coattails Can Carry the US Economy – The Washington Post

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If the US avoids a recession, or at least a deep one, it will most likely be able to thank industrial companies.

While demand on the consumer side of the economy is weakening, it remains solid in the manufacturing sector and, more important, appears to be sustainable even if shoppers cut back further. Consider the outlook from a few companies most people pay little attention to.

Eaton Corp. Chief Executive Officer Craig Arnold said variations of  “strong” and “strength” more than 45 times during a conference call with analysts on Aug. 2, and that’s not counting references to the dollar. “It feels positive, in some cases, too positive,” Arnold, whose company makes electrical gear for construction, power, autos and aerospace, among other goods. With a market value of about $60 billion, Eaton isn’t small.

Illinois Tool Works Inc., which is even larger than Eaton, said its organic sales were up 18% in July from a year earlier, the highest monthly growth rate all year. The company makes all kinds of products for the food service, test and measurement, welding, construction and auto industries, and most of those areas are “off to a really strong start in Q3.”

Companies as diverse as chemical maker DuPont de Nemours Inc., industrial distributor W.W. Grainger Inc. and a metal-bender like Arconic Corp. are saying the same thing: The manufacturing economy is sizzling.

“The industrial parts of the economy are certainly growing faster for us than the non-industrial parts right now,” said DG Macpherson, CEO of Grainger, which sells just about any industrial-related part or gadget you can think of.

While the strength of the industrial economy isn’t new, its ability to power through a downturn in consumer spending is a change from past cycles.

 “We strongly believe that the industrial economy will decouple from the consumer economy,’’ Scott Davis, an analyst with Melius Research, said in an email. “There’s just too much pent-up demand for projects and megaprojects that are based more on secular changes than cyclical.”

The reasons for this decoupling are multifold. An obvious one is the recovery of investment in the oil and gas industry. Although some industrial companies pulled back exposure to energy, especially in activity closer to the wellhead, after oil prices sank in mid-2014, the increase in drilling reverberates broadly through the industrial economy with increased demand for steel, construction, trucks and safety equipment.

Another is that the makers of autos and heavy trucks are still struggling to keep up with demand and have huge holes in their inventories that will take a while to rebuild. There were 95,000 cars in inventory in June, down from a monthly average of 660,000 in 2019, according to the Bureau of Economic Analysis. The number of Class 8 trucks, as the big rigs are known, in backlog as a ratio of the build rate was about 10 for the first six months this year, which is lower than last year when the computer-chip shortage was at its peak, but still higher than 6.6 in 2019, according to FTR Associates data. It’s the opposite problem from large retailers, which are grappling with too much inventory.Makers of commercial and private jets also have big backlogs to fill as people, restless from the Covid-19 shut-ins, are on the move again. Construction projects are moving forward, and even consumer-facing companies are continuing with projects to improve their logistics, an area where costs jumped during the pandemic.

The transition to cleaner energy also is also feeding the fire of industrial demand, and the climate change bill passed by the Senate over the weekend would keep those flames burning for some time — perhaps even through a consumer recession.

Eaton’s Arnold has positioned his company to ride the wave of electrical power demand as economies wean themselves off oil. The company has a long history of selling transformers and circuit breakers for power generation and transmission and recently made a push to become a key supplier to electric vehicle manufacturers. The company boosted its 2002 earnings-per-share guidance by 4 cents to a midpoint of $7.56 and increased its forecast for annual organic sales growth to as much as 13% from 11%.

“So despite all the talk about potential slowdown and downturn in the market, and we’ll be ready if we have one, we’re focused on investing to capitalize on what we see as the super growth cycle, driven by favorable trends in the recovery and some of our other end markets,’’ Arnold said on the call.

Eaton, DuPont and ITW, which raised its guidance in May, called out international weakness from the China lockdowns and Europe’s difficulties with soaring energy prices. Still, there are no signs the international weakness is bleeding over to the US. The year-over-year increase in US industrial production in June was more than 4%, a solid pace, and that comes on top of the big rebound of more than 9% in June last year.Ironically, the same supply chain snags that stoked inflation because demand wasn’t being met also kept a lid on the overbuilding of vehicles, homes, electronics and other goods that normally would occur and then cause a pullback in output. The trucking industry, for example, is notorious for the boom-and-bust cycles because companies buy too many trucks when freight demand is strong and then have too much capacity when cargo cools. Those truckers were never able to purchase all the trucks they wanted. There will be no big bust this cycle.

Add it all up, and it makes sense that the manufacturing industry can buoy the economy through a downturn in consumer spending.

More From Other Writers at Bloomberg Opinion:

• It’s (Still) Going to Be Hard to Get a Car: Anjani Trivedi

• Customer Demand Is There. Supply Still Isn’t: Brooke Sutherland

• New Chips Act Could Become a $280 Billion Boondoggle: Editorial

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Thomas Black is a Bloomberg Opinion columnist covering logistics and manufacturing. Previously, he covered U.S. industrial and transportation companies and Mexico’s industry, economy and government.

More stories like this are available on bloomberg.com/opinion

©2022 Bloomberg L.P.

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Business

A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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