CHICAGO The top executive at Eaton Corp (ETN.N) said on Friday he expects U.S. industrial output to rebound in the second half of the year after underperforming the wider economy yet again in the first quarter.
In a telephone interview held in conjunction with the Reuters Manufacturing Summit, Sandy Cutler, the diversified manufacturer's chief executive and chairman, also said the dollar's weakness was a boon to the U.S. economy, boosting exports and more than offsetting the negative effects of the housing downturn.
Cutler sounded a note of caution regarding the possibility of additional interest rate cuts by the U.S. Federal Reserve, saying that at a time of high material costs the central bank needed to be extra vigilant not to stoke inflation.
"The drumbeat is: 'Gee interest rates solve all economic ills,'" Cutler told Reuters. "No they don't. They're supposed to primarily be a tool for dealing with inflation."
He said the weak dollar was "an enormous plus" for the U.S., helping boost exports and offsetting the downturn in residential construction.
He said high oil prices, while inflationary, were also "causing a massive expansion and investment in both oil and gas and alternative energy" that was further boosting the business of U.S. manufacturers like Eaton.
He said he saw no evidence that the woes from the contraction in residential building in the United States was spreading into other corners of the domestic economy or overseas. And while he acknowledged that some indicators suggested parts of Western Europe, including the United Kingdom, France and Italy, were slowing, he said Eaton had seen no evidence the weakening had spread to Germany.
"Lots of speculation," he said, "but we've not seen that yet."
The company, which serves markets ranging from aerospace to construction to trucking, is also not seeing a drop in demand for its electrical control products and power distribution equipment from data centers -- despite the woes on Wall Street, whose firms have invested in the area.
"I think it's a misconception that the data centers are being driven by the financial segment," Cutler said. "They're being driven by every segment ... So no, we see that area continuing to be very active."
(For summit blog: summitnotebook.reuters.com/)
(Editing by Phil Berlowitz)