Our monthly fluid power survey indicates demand continues to trend below expectations, and average sales were down 1 percent y/y in June vs. the 2 percent decline reported in May. 

Backlog was worked down at an accelerated pace in the month and declined sequentially for the third consecutive month. 

Sources cut the outlook 200bp this month and now forecast sales will be down 1 percent for the year, the fourth cut to the 2013 outlook this year. The current outlook implies 2H sales in the down 1 percent range, similar to results in 1H13 against easier comparisons. 

Demand remained below expectations in our June fluid power industry work and average sales were down 1 percent y/y in June following the down 2 percent reported in May against comparisons that were significantly easier sequentially. The biggest shortfall vs. expectation continues from industrial OEM customers, who have not increased production rates as expected, and it appears production rates were again reduced in June. Industry sources have cut the outlook for the fourth time this year and now forecast sales to decline 1 percent in 2013, implying sales will continue to trend in the down 1 percent y/y range in 2H13, in line with results reported in 1H13 against easier comparisons. 

NA fluid power sources continued to report softer-than-expected growth throughout 2Q, which led to backlog deterioration and another reduction to the full-year outlook. 

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