Is R for recession or resilience?
Goldman Sachs reported today that it believes the US economy will suffer a recession in 2008, and Goldman is not alone. It seems everyone is worried about the impact of the credit crunch and high energy costs on US consumers. So, what might a recession mean for shipments by steel producers in the US in 2008?
There is clearly a correlation between GDP growth and steel demand. In developed economies, such as the US, the rule of thumb is that GDP has to grow at a base line level or steel demand contracts. In the US, the rule is pretty simple: If GDP grows by more than 2.5%, steel demand tends to rise. Conversely, steel demand falls when GDP grows by less than 2.5%. You can see this in the graph below. (If the graph is hard to read, click on it and it will enlarge).
