Economy

What Caterpillar's Profit Warning Means for Global Growth

Caterpillar's warning about its profits three years from now sends an ominous message about the global economy — that the current slowdown is likely to be long-term regardless of what policy makers do now.

As the world's premier manufacturer of construction equipment, Caterpillar serves as a bellwether for growth.

So when the company Monday cut its guidance not for the coming quarter or coming year but rather all the way into 2015 based on weak global growth, it implied that even if the U.S. solves its fiscal issues, the euro zone escapes its debt crisis and China avoids a hard landing, business conditions likely will be tepid for some time ahead. (The firm reduced its 2015 earnings guidance from a prior forecast of $15-$20 a share to $12-$18.)

"There are a tremendous amount of transitions going on globally and it's going to take time to work through them," said Steve Blitz, chief economist at ITG Investment Research in New York. "I applaud Caterpillar for going out this far, because they're telling the investors, they're telling the world, that these are not problems that are going to get solved immediately."

If the year 2015 rings it a bell, it should: That's the same target the Federal Reserveput on the duration of its current zero interest-rate policy enacted in the wake of the financial crisis of 2008. (Read More: Fed's 'QE Infinity': Four Things That Could Go Wrong)

More specifically, the central bank said it would maintain rates at "exceptionally low levels...at least through mid-2015."

It may be no small wonder, then, that less than two weeks after the Fed's interest rate stance, announced as part of the third round of quantitative easing, that one of corporate America's chief proxies for growth also warns out to 2015.

"The world didn't get to this place overnight," Blitz said. "It's been working in this direction for the past 30-odd years, and it's not going to get fixed in a fortnight."

Indeed, Washington lawmakers are running out of time to avoid the raft of spending cuts and tax hikes that will take place before the end of the year — what Fed Chairman Ben Bernanke has deemed the "."

And even if it does reach the required deficit reduction targets to avoid the cliff, the solution likely will entail austerity measures unlikely to spur significant growth over the near term.

Meanwhile, China's prognosis remains in question and Europe's sovereign debt crisis, despite assurances for help from the European Central Bank, is nowhere near over.

So caution of the likes that Caterpillarexpressed seems in order.

"It's an ongoing set of issues that a lot of people in corporate America and the market more generally are getting their hands around," said Michael Hanson, senior U.S. economist at Bank of America Merrill Lynch. "Part of the challenge is there's a lot of uncertainty right now. There's a temptation in a certain environment to turn back and hunker down and wait for things to show some more clarity."

If the goal is more clarity, the wait could be a while.

Caterpillar, after all, is far from the only major company at the heart of the economy to issue warning bells recently, though it is unique in how far into the future it is looking.

FedEx and Norfolk Southern — cornerstone companies of the Dow's transportation index — have issued their own profit warnings, for the third quarter. Moreover, analysts expect the Standard & Poor's 500 to show an aggregate 2.1 percent drop in third-quarter profit when earnings season begins next month, representing a substantial drop from initial projections of a 3.1 percent increase.

Overseas, the picture is no better.

Worries continue that China's transition from an export-based economy to a consumer-driven society will prove bumpy, while there is little doubt that Europe is in a full-fledged recession, with the only question being how deep and how long it will run.

Mark Grant, managing director at Southwest Securities, told CNBC's "Squawk Box" program that he foresees China gross domestic product growth at just 4 percent — about half the current rate — and a recession in the U.S. by early 2013.

"The Fed keeps putting liquidity into the system, but it doesn't solve the solvency issues here," Grant said. "It takes a while until you get to the real difficulties."

While a U.S. recession forecast certainly doesn't jibe with the consensus economic view, growth concerns abound.

Citigroup has issued a series of cautionary statements about U.S. and global growth, and while it is not forecasting a recession it has been warning over the dangerous dynamics at play.

"For the U.S., the fundamentals and the risks attached to them appear generally the same: From the bottom up, sector by sector, recovery’s underpinnings are gradually improving," Citigroup economist Robert V. DiClemente warned in a note to clients. "Yet overhanging macro and policy risks remain decidedly negative."