Steel Summit: ITR economist urges execs to prepare for growth, not recession

Taylor St. Germain of ITR Economics delivered a data-driven message that flipped the narrative on any fears of recession – industrial growth is already underway, and the next four and a half years will be a sprint.

“Let data do the talking,” he told the crowd in Atlanta. “We have 12 consecutive quarters of growth, both in the US and in the global economy.”

He laid out a bullish forecast for industrial demand, urging attendees to shift their mindset from survival to scale.

Recession fears are overblown, according to the economist. “I don’t know where they’re getting that expectation,” he commented, referring to media warnings. “The global economy is expected to continue to grow.”

While GDP held steady in 2024, St. Germain reminded the crowd that “our manufacturing economy was actually in a recession for all of 2024.” But that’s changing fast, and “we’re starting to see the early signs of this industrial demand building.”

Steel production, however, has been lagging. “We’ve seen the growth rates for global steel production sag,” he said, blaming sluggish growth in China and industrial recessions in Europe and Mexico. But the tide could be turning. “We expect global steel demand to pick up as these industrial economies are really starting to accelerate,” said St. Germain.

His forecast shows mild single-digit growth for US steel production in 2026, tapering to 1-2% in 2027.

Tariffs were, of course, another hot topic, and St. Germain took a practical stance: “Tariffs are not all good. Tariffs are not all bad.” He emphasized the need for an industry-by-industry approach. “If I’m petroleum or coal, 91% of that industry is taken care of right here at home. I’m really not all that worried.” But for sectors like electronics, which rely heavily on imports, “I’m very worried about that industry in terms of being disrupted,” he commented.

Inflation, though, is the real margin killer. “Enjoy your interest rate cuts later this year,” St. Germain warned, “because that’s likely the lowest interest rate you’re going to see for quite some time.”

Rising labor, electricity, and material costs will squeeze profitability, he said. “Yes, your sales will grow, but your profits are still going to be under pressure,” he noted.

He advised those in attendance to invest in productivity. “The businesses that can increase their efficiency and productivity – those are the businesses that are going to win,” he stated.

2030s outlook: cloudy with a chance of recession

While his near-term forecast was bullish, St. Germain didn’t sugarcoat what’s coming next.

“We don’t see that red recession color until we get to 2030,” he said, referencing ITR’s long-range business cycle model.

The downturn, he warned, won’t be a blip: “That number jumps to 70%: 70% of our entire government budget is going to be just healthcare, Social Security, and interest rate payments on the debt.” With baby boomers exiting the workforce and entitlement costs ballooning, the macroeconomic drag will be hard to ignore.

His advice to steel executives was to use the next four and a half years wisely.

“Take advantage of the growth,” he urged. “Find yourself relatively debt-free. Find yourself in a good cash position by the end of the decade.”

St. Germain pointed to rising inflation and structural headwinds as reasons to build resilience now. “We don’t want to move into this period of what we call ‘profitless prosperity,’” he cautioned.

Growth is coming, according to the ITR economist, but the 2030s are going to test who’s really built to last.

Did you know… Attendees of this year’s Steel Summit can access some of the presentations from this year’s event using the SMU Steel Summit app!