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Quarter-End Insights

Our Outlook for the Industrials Sector

Industrial production is hindered by housing and input costs.

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Sluggishness in housing continues to plague the general economy, as well as the domestic industrial sector. Residential fixed investment nicked overall gross domestic product by more than a whole percentage point for the third consecutive quarter in the first quarter of this year, and five of the past seven overall. It doesn't appear to have gotten much better in the second quarter, as construction statistics such as housing starts and permits both continued to plummet more than 30% year over year in each of the first two months of the second quarter at seasonally adjusted annual rates. It's difficult to see any bottom in the near term, as bloated inventories of for-sale homes combined with rising foreclosures make for a tough supply-demand equation for at least the next several quarters. The offshoot is that any company even tangentially exposed to housing continues to suffer top-line pressure.

Eric Landry does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.