In its June newsletter, the American Institute for International Steel (AIIS) report that GDP data for USA in Q1 2013 was revised down to 2.4% from 2.5% in the first estimate.

The government report indicated that GDP growth in the first quarter was due to increased inventory accumulation, increased in exports and a decrease in imports. The decrease in imports, based on historical analysis, is not a positive trend that one may think as approximately 55% of all imports are used for further processing in US factories and the rest are finished products for consumer consumption.

The ISM Purchasing Managers’ Index posted its first sub-50 value in May since June 2009, at 49% which means that the manufacturing sector contracted. AIIS say this is a seriously worrying marker, and although one month’s sub 50 result does not prove a trend the index has been weakening since February this year, month on month. Other ISM sub-indices also show weakening in the manufacturing sector, with order backlogs, production and new orders all below the breakeven mark of 50, signifying contraction.

The steel intensive sectors continue on the trends seen since 2009, with autos leading the way. In May the industry-wide seasonally adjusted annualised rate was 15.3 million units compared with 14.9M in April, which was a small decline from March. The sales increase was led by pick-ups. The big three US auto companies experienced an increase in their market share in May at the expense principally of the Japanese and Korean brands, most of which are also manufactured in the USA.

While there is good news for the auto sector and oil and gas related (which while still consuming healthy levels of steel products is burdened by high inventories, especially as regards OCTG), the most important steel sector, non-residential construction, remains mired in slow, or nearly no growth. The most recent data for that sector is for April, running a paltry 1.5% higher than the weak data for April 2012. Moreover, employment in the non-residential sector for May actually declined even while the residential sector continues to expand and add jobs. AIIS remain cautiously optimistic that, with history as a guide, the normal one-year delay between a healthy residential and a healthy non-residential construction sector will assert itself sometime late in 2013.

Source AIIS