Economic growth forecasts fall; steel use is erratic

Latest from the United Nations on global economic growth forecasts the pace of growth will slow to 1.8% this year, verses 3.8% in 2007…for the U.S., 2008 growth was placed at -0.2% compared with 2.2% last year…it’s all traced, they say, to the housing slump and the credit crises, citing a decline in employment, consumer confidence and lower spending…

This forecast is significantly more bearish than what the International Monetary Fund was saying in the fourth quarter of last year and considerably more bearish than what some private economists are saying about the U.S. economy in the first and second quarters of this year…where there is agreement, it’s on inflation…the UN is looking at a global inflation rate of 3.7% this year.

The Federal Reserve also cut its forecast for U.S. economic growth to 1.2% in 2008, down from the 1.3% to 2% it estimated just three months ago…

Although not the most important of economic indicators, latest leading indicators posted a 0.1% rise for April, following a similar uptick in March thus potentially suggesting a bottom…this index is referenced for predicting economic activity in the next three to six months…lets hope it proves true…

Inflation, as measured by the Producer Price Index, surprised somewhat in that the increase was less than expected BUT a lot had to do with lower gas prices in April and food prices that were unchanged (as if…) Most economists see inflation rising over the next couple of years…as the data shows, producer prices are up are up 6.4% vs. last year and “core” prices are rising the fastest since 1991.

The more we see and read, the more convinced we’ve become regarding mounting inflation pressures going forward…it’s our belief that this issue will be in the forefront for some time to come (next couple of years, in fact).

Moving on to steel…the International Stainless Steel Forum forecast stainless steel production to increase 6% to 29.32 million metric tons this year, driven mostly by Asian mills…last year’s 27.7 million metric tons produced included a stock draw of more than one million metric tons…recovery in 2008 is credited to growing industrial consumption, but sharp increases in input costs, they say, pose a possible danger to demand.

According to the latest steel production report from the International Iron & Steel Institute, world crude steel production for the first four months of this year totaled 457.29 million metric tons, up 5.7% compared with the Jan-April 2007 period… China produced 169.8 million metric tons of crude steel, an increase of 9.1% compared to the same period in 2007…U.S. steel production, meanwhile, was placed at 33.77 million metric tons, up 6.5%…

Looking next at domestic steel shipments, the March figure was lower by some 2% year over year…first quarter shipments, however, at 27.6 million tons…shipments were up 4.9 % compared with the first quarter of 2007…April carbon steel inventories, as reported by Metal Service Center Institute, were higher as flat rolled shipments by the service centers fell, offsetting increases in plate, beams, bars, and pipe & tube…Michelle Applebaum Research (MARI) credits higher inventories at the nation’s service centers (highest in seven months) with some inventory building along with higher imports…does this signal a trend? Will we continue to see higher production, increasing imports and lower domestic shipments? MARI, however, expects to see “only small building of inventory” going forward…

Watch industrial production data. Reason: Many believe the relationship between industrial production and mill shipments is an important indicator of demand for flat products in particular since it measures output in automotive, appliance, utility, and energy sectors – all major consumers of steel.