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05/13/2016
Steel and the Impact on the Economy
Years ago...like 20+...I once asked legendary bond king Bill Gross, then at PIMCO (where I was employed), if he could use but one economic indicator as a predictor of future activity what would it be? Steel production, he offered, which I got a kick out of because I have tracked U.S. steel production since 1990, as listed weekly in Barron’s. [Don’t ask for the data...it’s all on spread sheets in my own handwriting.]
I imagine Mr. Gross would give an entirely different answer today, though I’m not sure what he’d select. That said I’ve expanded a past piece of mine to show that at least in the first quarter (Q1), the trend in steel ends up being a pretty good predictor of GDP.
So following are 10-week periods from 2012-2016. Figures are in ooo’s tons. Q1 GDP, annualized, follows.
2/5/16 – 4/8/16
1657 [2/5]
1685
1703
1699
1692
1673
1722
1668
1675
1650 [4/8]
[Q1 GDP, first look, 0.5%, annualized]
2/6/15 – 4/10/15
1782
1769
1760
1716
1657
1645
1623
1639
1628
1600
[Q1 GDP 0.6%]
2/7/14 – 4/11/14
1804
1839
1845
1831
1861
1840
1828
1885
1820
1812
[Q1 GDP -0.9%]
2/8/13 – 4/12/13
1801
1822
1814
1843
1857
1828
1785
1809
1819
1858
[Q1 GDP 1.9%]
2/3/12 – 4/6/12
1897
1907
1929
1942
1930
1947
1959
1913
1947
1900
[Q1 GDP 1.9%]
[Source: Barron’s, StocksandNews.com database]
Reminder...1.9% annualized growth is putrid. We’ve been in a 2.0% mode for years and years, long after the Great Recession ended. We should have been at 3% to 4%.
Someday I’ll look at steel and other quarters, re GDP, but it has certainly been spot on for early in the year.
Wall Street History returns in two weeks.
Brian Trumbore