US Economic Update
The American Iron and Steel Institute reported that steel production has been strong:
In the week ending on January 28, 2017, domestic raw steel production was 1,736,000 net tons while the capability utilization rate was 73.3 percent. Production was 1,607,000 net tons in the week ending January 28, 2016 while the capability utilization then was 68.7 percent. The current week production represents an 8.0 percent increase from the same period in the previous year. Production for the week ending January 28, 2017 is up 1.9 percent from the previous week ending January 21, 2017 when production was 1,703,000 net tons and the rate of capability utilization was 71.8 percent.
Adjusted year to date production through January 28, 2017 was 6,839,000 net tons, at a capability utilization rate of 72.1 percent. That is up 6.4 percent from the 6,428,000 net tons during the same period last year, when the capability utilization rate was 68.7 percent.
Urban highway driving for 2016 has been above the previous two years.
The non-metallic product leading and coincident indicators have both turned up suggesting construction is expanding.
The Goldman Sachs metals indicator has also been strong confirming the strong steel production numbers.
Both residential and non-residential construction are rising, with residential construction back at levels not seen since 2008 and non-residential levels last seen in 2009.
The ISM Manufacturing Index is comfortably in expansion territory.
Core capital goods have ticked up.
One of my favourite indicators, light truck sales, continue to make new highs.
Commodity prices are positive year over year and the purchasers price index is positive for the first time since 2015.
Manufacturers’ new orders is still showing weakness but at levels pre-financial crisis.
The ISM Service Index is well above the expansion level.
Average hourly wage growth is the highest sine 2009.
Retail sales growth is at a level last seen in 2014. Consumers are spending their wage increases.
GDP was weak in the 4th quarter.
Real interest rates are still negative but have ticked up. Should this continue liquidity will tighten and monetary accommodation would become tighter.
One major cause for concern is that the ratio of coincident to lagging indicators is at a level only seen in recessions.
The US economy is expanding but is likely in the stages of the business cycle.