MACRO FLASH REPORT

Over the last couple of months, the S&P Global and ISM Manufacturing PMIs have been on opposite sides of the contraction / expansion threshold, providing a mixed view of overall manufacturing activity. This morning’s worse than expected preliminary release of July data for the S&P Global Manufacturing PMI underscores the fact that the much-anticipated recovery in the manufacturing sector continues to be pushed back, possibly not until after the interest rate cutting cycle begins.

The upcoming supply dynamics have pushed us into the Low Imports, High Domestic Production quadrant, implying that from supply alone, there will likely be additional downward pressure in the near term.

The surplus of material remains intact, while July import expectations were revised lower, to show a more modest uptick from June. The global adjusted HRC spot price reached its lowest level since late 2020. The domestic price continues to slowly approach additional fundamental support levels.

This week's data highlights a modest increase in industrial sector activity, from subdued levels. What does this mean for steel? The biggest risk in the market is the inventory overhang. At these levels of activity resolution of the current surplus could be prolonged.

June’s Housing Starts and Building Permits both rebounded of recent lows and came in above expectations. While this is an encouraging sign after a few months of a downtrend, current levels remain on the lower end of the range which started at the end of 2022.

June Retail Sales, were encouraging for continued growth in the broader economy, on the industrial side, they signal that the headwinds for the auto sector remain in place. This confirmed what was seen in auto sector data from earlier this month.