ITW: U.S. weakness spreads, but not abroad

By Ben Klayman

CHICAGO (Reuters) - Illinois Tool Works Inc's (ITW.N: Quote, Profile, Research, Stock Buzz) chief executive said on Tuesday that weakness in the U.S. general industrial economy was spreading, but so far not beyond the borders of this country.

"We're seeing obviously the weakness in the general industrial economy spreading, so we're not seeing any great tail winds," David Speer said at the Reuters Manufacturing Summit in Chicago.

"I, frankly at this point, don't see any catalysts that would suggest there's going to be any near-term change," he added.

ITW, a diversified manufacturer that makes everything from fasteners to food-service and welding equipment to countertop materials and other products, derives 13 percent to 14 percent of its revenue from the struggling automotive, residential housing and appliance sectors.

Speer called North America "the more challenging economic environment" but said U.S. weakness had not spread overseas.

"I haven't seen any indications of that yet," he said, adding he expects growth in Europe this year after a banner 2007, while Asia continues to be very strong.

In the United States, Speer said the auto sector is getting close to the bottom of its weak demand, while the housing sector is "obviously still seeking a bottom."

"I don't see a quick recovery in housing," he said. "It's probably a late '09 story before we see any significant improvement in the (housing) starts data, given the levels of inventory and the challenging subprime market."

Speer said he twice before thought the U.S. housing sector had hit bottom, only to be proved wrong both times, so he is unsure now on timing.

"If I were to guess where the bottom is, it's probably 900,000 annualized starts. But in terms of predicting when it's going to get there, I'd say we've got probably at least a couple of quarters worth of data to work through before we're really going to realize whether we've got a bottom or another false bottom," he said.

U.S. housing starts rose to an annual rate of 1.012 million in January, a slight rebound from December when the pace was the lowest since May 1991.

Speer said Glenview, Illinois-based ITW's forecast of $800 million to $1.2 billion in annual acquired revenue in 2008 "could be conservative." ITW acquired companies with annual sales of about $1 billion last year.

(Reporting by Ben Klayman and Jui Chakravorty; editing by John Wallace)