Economic Forecast. Essay

1468 words - 6 pages

IntroductionFrom the late 19th century until the years following World War II (WW II), the United States steel industry was the largest in the world. At times manufacturing over half the world production of the metal. After WW II, however, both Europe and Japan rebuilt their steel plants from the ground up, replacing older furnaces with newer, more efficient technologies and operating their industries often with the help of their respective governments. Eventually, other newly industrialized countries (Brazil, China, and South Korea) built their own industries. Combining efficiency with low labor rates and under priced steel in every market including the United States.For the industry's future, analysts point to new technologies that will produce quality steel more cheaply and without negative impact upon the environment. Among the technological advances, the overall productivity of basic oxygen-furnace steel making is being improved with new bottom blowing and ladle refining techniques. Coke making, a difficult process to control environmentally will be fitted with advanced control systems.The steel industry is critical to the United States economy. Steel is the material of choice for many elements of construction, transportation, manufacturing, and a variety of consumer products. Traditionally valued for its strength, steel has also become the most recycled material, with two-thirds of United States steel (66%) now produced from scrap.The forecasts for the steel industry are very difficult to predict. With 2005 gasoline prices nearing $3.00 per gallon in the United States, automakers have been spending their dollars in research and development of lighter weight steel.Investors need to be aware of how the economy is affected by the various economic indicators in order to watch market performance. By tracking data of this composite index of economic indicators growth can be watched, which can lead to higher corporate profits. A study of the following economic indicators can build a backdrop into the various markets and forecast of recessions and recoveries.InflationCapacity UtilizationEveryone is on the lookout for signs of inflation. One gauge used by economists is capacity utilization. Rising demand causes factories to run more production lines for longer shifts. However, bottlenecks and delivery delays can give manufacturers the opening to raise prices. A utilization rate above 83% has typically triggered concerns of budding inflation. But that rule of thumb may not be true anymore.Technology has lowered the utilization rates at which factories can operate without facing production pressures, according to a discussion paper released by the Federal Reserve. The authors* examined data on 111 manufacturing industries from 1974 through 2000 and controlled for production growth and level of investment for each industry. They found that, because of new technologies put in place, capacity utilization rates fell 0.2 to 2.3 percentage points, on...

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