Dr. Chis Kuehl: Growth for Balance of Year to be Robust

Written by Sandy Williams

Dr. Chris Kuehl, one of our Steel Summit keynote speakers and Managing Director of Armada Corporate Intelligence, provides a monthly overview of economic and global risks facing the U.S. economy and the steel industry. Armada’s June summary is as follows:

1. GDP growth expectation has dropped to 2.1% for the full year, but… The IMF, Fed, World Bank, and several prominent investment houses now have US 2014 economic growth pegged at 2.1%. That’s only because the first quarter is coming in weaker with each revision. It looks like the annual economy will start in the hole by about -1.6%. Therefore, the last three quarters of the year will have to grow at more than 3.5% to get our average back up to 2.1%. So, don’t let the headline figure scare you, growth for the rest of the year will still be robust (barring any major headwinds we discuss later).

2. Still significant pent up demand. Velocity of money is still at an all-time low and more than $3 trillion is still sitting. We have the latest update to the M2 chart later in the brief, we can see that it is still “sitting”.

3. Housing slowing. The total number of housing starts is decelerating instead of improving. That could be a warning sign.

4. Unemployment is still far too high, but showing some improvement. But, as mentioned last time, the wrong types of jobs are being created (or not enough higher quality jobs) in many instances (low pay or part time), and not enough qualified workers to take the nearly 4 million job openings that the country currently has.

5. Geopolitical factors continue to impact. The situation in Iraq and Ukraine specifically is going to impact businesses. Whether it eventually affects the dollar and treasuries or simply becomes an issue for gas and diesel prices, it is important to keep tabs on the situation in those two theatres. The Ukraine situation, depending on how aggressively Russia continues to act economically, could impact trade relations with some countries.

Note: SMU will feature Dr. Chris Kuehl at the Steel Summit Conference, Sept. 3 & 4 in Atlanta. Dr. Kuehl, managing director of Armada Corporate Intelligence, will address the current and potential risks facing the US economy and steel industry.

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