Monthly Key Market Indicators (KMI) fell through June and into July, while steel buyer sentiment tumbled to a two-year low, according to the latest analysis by Steel Market Update. Negative and neutral indicators have increased, while positive indicators have collapsed.
Present headwinds are notable. Consumers and businesses have pulled back on spending, and rising inflation and ongoing supply disruptions continue to weigh on the economy. July’s consumer confidence reading fell to its lowest measure since February 2021.
SMU’s Key Market Indicators include data on the economy, raw materials, manufacturing, construction, and steel sheet and long products. They offer a snapshot of current sentiment and the near-term expected trajectory of the economy. Markers for the Present Situation had been declining. The trend accelerated in July.
In the latest data, just six of the 38 Present Situation indicators are positive, plummeting nine points month-on-month (MoM). The neutral and negative positions both expanded over the same period. The neutral indicator grew by 4 points to 16, while the negative indicator rose 5 points to a reading of 16 as well.
SMU’s Present Situation and Trends analyses in the table below are based on the latest available data as of July 29, 2022. Readers should regard the color codes in the “Present Situation” column as a visual summary of the current market condition. The “Trend” columns are color-coded to give a quick visual snapshot of the market’s direction. All data included in this table was released within the past month. The month or specific date to which the data refers to is shown in the second column from the far right. Click to expand the table below.
SMU’s Present Situation indicators below highlight the uncertainty and negative trajectory of the domestic market.
Through July, 42.1% of the marketplace is negative, a 13.2 percentage point increase MoM, and not far off from its worst reading of 47.4% at the height of the pandemic in July of 2020. Presently, 15.8% of the market is positive, while 42.1% of market is neutral – broadly in a wait-and-see attitude.
With more neutral and fewer positive indicators, present situation indicatos are now just 57.9% as neutral-to-positive, according to SMU’s assessment of key market indicators, a noticeable decline from 71.1% one month ago.
Our monthly assessment of the Present Situation since January 2010 on a percentage basis is shown in Figure 1.
SMU’s Trends indicators have seen a considerable negative turn. The dynamic points to a lack of long-term clarity resulting from the current headwinds facing the US economy.
It is important to note that most values in the Trends columns are three-month moving averages (3MMA) to smooth variations in monthly data. Note that in many cases this is not June or July data, but data that was released in June and/or July for previous months. Compared to month-ago data, the negative trend rose from 36.8% to 47.4% in July. The neutral trend rose by 2.7 percentage points to a reading of 13.2%. The positive trend declined from 52.6% to 39.5% over the same span.
The continued negative turn places July’s reading well behind the high of 81.6% seen last June. Figure 2 shows the recent movement of the trends and historical data for comparison.
The SMU Steel Buyers Sentiment Index is a measure of the current attitude of North American steel buyers regarding their company’s chances for success in today’s market. The single value of the current sentiment index fell to -8 in early March 2020, a 66-point drop in just a month as the pandemic devastated the economy. It rebounded to a healthy +82 by late March but has trended down since. July 21’s reading fell 17 points to 43, a two-year low.
Figure 3 shows the 3MMA of the index since 2010. A reading above the neutral point of zero indicates that buyers have a positive attitude about their prospects. Steady-to-moderate demand and falling steel prices appears to be pressuring the Steel Buyer’s Sentiment Index lower.
By David Schollaert, David@SteelMarketUpdate.com
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