By Shoshanna Delventhal Updated Jan 28, 2019
The latest and most tangible sign was the announcement on Monday that the China slowdown has hurt results of both chipmaker Nvidia and construction equipment giant Caterpillar. Caterpillar, for example, posted its largest quarterly miss in years as the Asian nation's slowdown hurt sales of mining and construction equipment. "Sales in Asia/Pacific declined due to lower demand in China," the company said. Caterpillar's 2019 earnings guidance also came in at the low end of estimates, according to news reports.
5 U.S. Companies Squeezed By China's Slowdown· Caterpillar; world’s largest construction equipment manufacturer
· PPG Industries; global supplier of paints, coatings, and specialty materials
· H.B. Fuller; adhesives manufacturing company
· Stanley Black & Decker; maker of industrial tools and household hardware
· ON Semiconductor; semiconductor supplier
· Nvidia; makes chips for broad range of markets
China Slowdown's Broad ImpactAs the Chinese economy slows to its lowest growth rate since 1990, a broad range of U.S. companies are seeing their sales soften significantly after a three-year run, per a detailed story in the Wall Street Journal. “China is weaker than normal, weaker than seasonal,” said Keith Jackson CEO of ON Semiconductor.
H.B. Fuller, which generates roughly 13% of its revenue from the Asian nation, indicated that lower-than-expected demand had eaten into $10 million off its profit in 2018, and will likely cut its profit by $20 million this year. “We had estimated weakness in China,” said CEO James Owens, per the Journal. “It was actually worse than we expected.”
Slowdown Just BeginningNot all industrial companies have been hit by the recent downturn. Manufacturers that get most of their revenue from the domestic market say business remains strong. According to the Bureau of Labor Statistics, U.S. factory output reached its highest point in a decade in the third quarter.
But it’s likely that the effects of the China's downshift will be long-lasting for many companies, says a column by Barron’s economics commentator Matthew Klein. “China’s long boom is over. Persistent weaknesses in productivity growth and a looming demographic catastrophe will hobble the country for decades to come,” he wrote.