Industrial Economic Signals: Down But Not Out

It’s easy to jump on the bandwagon of doom and gloom for the US economy. A falling dollar, a sub-prime mortgage mess, sluggish holiday retail sales and a whopping $9 trillion of national debt make it hard to conclude anything other than a recession for 2008. Since Q3, 2006 leading CEO organization Vistage has been predicting a Q2 2008 recession.

But the data is not yet supporting that position. Crain’s Chicago in late December reported on the National Association of Purchasing Manager’s latest business activity index for the Midwest which was at a healthy 56.6. Anything over 50 indicates growth. A reading under 50 indicates contraction. This survey is an interesting benchmark because it largely examines factory activity. The article goes on to say that these numbers are much better than economists forecasted. Perhaps the most interesting note however relates to pricing specifically, “prices paid fell to 63.8 from 76.2 a month earlier”.

What ramifications does this have for metals prices? It’s unclear. We’ll be coming out with our 2008 metals pricing predictions shortly. But many of those predictions are based on economic fundamentals. And though some of the large industrial bell-weather companies (e.g. Caterpillar) are having down years, it’s too early to call the sector out.

–Lisa Reisman