Caterpillar sales have been declining for a little over four years with an uptick earlier this year. This had been driven by the slowdown in sales to China and, to a lesser extent, to Latin America. Cost management efforts have seen the share price increase significantly since the lows in early 2016.
Since North America is about 50% of the company’s sales, the US economic indicators should have an impact. However, the high correlation with coal mining appears to be incidental as both have been declining over this period. In any case, the correlation here is just above the 0.85 minimum. The high correlation with money supply may have more impact on the purchase of CAT’s high ticket items.
It is interesting that SalesForekast™ does project a turnaround in CAT sales – but they are more likely to remain flat. The turnaround may be much more substantial if there is significant spending on infrastructure as proposed by the new administration.
The results of the forecast suggest that there maybe other factors that have an impact on Caterpillar sales. The SalesForekast™ software allows the user to import a wide range of indicators directly from FRED (Federal Reserve Economic Data) to determine what else may have high correlation and greater impact on future forecasts.