After rising 3.9% in 2015, but only 0.7% in 2016, WSD’s IDX is up an average of 3.6% for the first eight months of 2017. This rise is composed of a 6.1% increase for the capital equipment short-lead-time (CES) component of the overall index; a 5.4% rise for the capital equipment long-lead time (CEL) component; and, a 3.7% drop in the consumer goods component (CDIDX) component.
Looking ahead the next few years, a surge in capital spending in the United States (perhaps reflecting a sizable investment credit on capital outlays by businesses) seems to be essential if USA steel demand is to rise significantly given the following: a) many USA municipalities have high debt and sizable entitlement obligations for retiree pension and medical costs – both of which limit their ability to engage in the financing of sizable infrastructure projects; b) there’s been about a 50% decline in USA retail commercial construction as internet shopping takes away market share from malls shopping; c) surging oil and gas drilling, that has significantly driven up steel demand, may now be approaching a peak; d) USA automotive output may also be close to peak; and e) Publicly funded non-residential construction has recently fallen to a 10-year low.
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