Each month, Armada Corporate Intelligence prepares a couple of index collections for two groups very connected to the U.S. manufacturing and industrial community: the Industrial Heating Equipment Association (IHEA) and the Chemical Coaters Association International (CCAI). Both are engaged in the treatment of metal for industrial uses and are, thus, heavily engaged in sectors such as the automotive industry, the energy world, aerospace and many others. Every piece of metal that is used in manufacturing or construction is treated in some way, and these are the companies that do that treating. The indices we look at give a good assessment of what is happening and this is an excerpt of the latest report.
If you look at the June version of the CCAI index, expected growth is somewhat hard to see. Of the 12 indicators, seven of them are trending in a negative direction and five are either very slightly positive or essentially flat. What’s worse is that the negative indicators really sank dramatically.
As usual, there was some joy in the category of “New Automotive and Light Truck Sales.” This continues the upward trend and stands one of the only real bright spots. The day that these sales start to flatten out is the day the economy really starts to stutter. The other indicator that looks pretty healthy is steel consumption--That is related to the demand for these vehicles as the other sectors, especially energy, had been propelling steel demand have been weakening.
The construction arena is getting slightly better, but not in the public sphere (re: where the steel demand exists). The “New Order Index” from the PMI isn’t getting any worse, but it also didn’t improve after falling dramatically last month. Concern permeates in the business community as a whole as will be obvious when we look at the readings that are in decline.
The more complete story is unfortunately found in the negative numbers. They are all to one degree or another connected to demand. The New Housing Starts statistics are down as mortgages remain difficult to obtain. Metals prices are all down in another demand-driven situation, to be sure. It is also significant that the producers have been reluctant to pull back on production because of market share concerns.
Meanwhile, capacity utilization numbers are dovetailing with capital investment, durable goods orders and factory orders. These deep plunges illustrate a mark of real economic uneasiness.
- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence