Posted on 29 Jul 2019
US real gross domestic product increased at an annual rate of 2.1% in the second quarter of 2019, according to Friday’s advance estimate from the US Commerce Department’s Bureau of Economic Analysis — a rate that slightly exceeded consensus expectations, but reflected the Q2 slowdown in the domestic steel sector.
Domestic steelmakers tend to thrive, in terms of pricing, when US GDP growth is 3% or more. Not so in Q2 when the price of US-made steel hot-rolled coil declined 25% — down $170.50/st — to $520.25/st at the end of June from $690.75/st on April 1.
BEA data showed that the increase in real Q2 GDP included a 4.3% uptick in consumer spending, but a 5.5% decline in business investment, and acknowledged “negative contributions from private inventory investment, exports, nonresidential fixed investment and residential fixed investment.”
Rather than buying and replenishing inventories, steel service centers and distributors – which account for about 35% of all steel demand in the US – depleted their stocks.
In the first quarter real GDP increased 3.1%, meaning the US economy grew an average of 2.6% in the first half of the year, based onthe advance Q2 estimate.
US Q2 GDP growth of 2.1% reflects weaker steel procurement
In H1 2019, the bellwether, benchmark price of US-made steel HRC, as assessed by S&P Global Platts, averaged $654.71/st. The price on January 1 was $740/st, but it lost nearly $220, falling 30% to $520.25/st by the end of June.
Since early July, however, the price has rallied – closing July 25 at $561.25/st, up nearly 8%.
The second GDP estimate for Q2, based on more complete data from the BEA, will be released on August 29.
