IHEA Monthly Economic Report: Certain Uncertainty

The monthly Industrial Heating Equipment Association (IHEA) Executive Economic Summary released in February shows that 2023 has already been forecasted in very different ways by expert analysts. Some are claiming that 2023 is just going to be terrible with rampant recession, pointing to the Purchase Manager's Index (PMI) as the true marker for what to expect. Then, there are the more moderate studies. The automotive and aerospace industries are looking up. The split forecasts might leave one spinning in confusion.

By taking a closer look at some of the specific industries, the economic summary shows that, "We don't quite know what to do with 2023 yet." The report reiterates this balance of highs and lows, with several bright spots for heat treaters, "In the more detailed breakdowns we see some significant variations – booms in automotive and aerospace but declines in machinery. Less volatility in fabricated metal and more volatility as far as primary metal is concerned."

The 10 economic indices show the aforementioned balance with almost half showing some increase, and the other sectors have a drop. A closer look below will show that even within the indices that are dropping, heat treat related markets are holding steady. Global events continue to impact metal prices. Indices that are down include: New Automobile and Light Truck Sales, New Home Starts, Industrial Capacity Utilization, and the Transportation Activity Index. The up indices are Steel Consumption, Metal Pricing, PMI, Capital Expenditure, and Durable Goods.

High interest rates and high new vehicle prices are driving these sales down. Heat treaters, keep in mind that older vehicles are still on the road needing parts and eventually replaced.

"There is a threat of continued low demand."
Source: IHEA

With a look at new home starts, yes the index is down. There is a bit of a surprise within this big picture. Multi-family unit construction is actually up by 11%! This means heat treating is needed for construction components as well as appliances that go into these units. There is a relationship here with the durable goods pictured a few charts further down. Demand is high for these manufactured items.

"New homes are expensive, and loans to buy them are expensive as well."
Source: IHEA

Metal pricing reflects political events around the world - places like China and Peru where industrial metals and copper are sourced. Supply chain problems are correcting, but government conflicts continue. Currently the numbers are up, but quite a bit of uncertainty swirls.

“The sense is that prices are settling into a predictable pattern — for now.”
Source: IHEA

Durable goods are things that are supposed to last years. Appliances for the multi-family housing units shown above would be something in this category.

"A bigger demand for U.S. exports and most of these are high-value manufactured goods."
Source: IHEA

Robotics industry is booming too as is the automation sector. Durable goods also includes U.S. exports, and those are in high demand.

2023, it would seem, is a year to "Keep calm, and carry on". The incredible lows due to the pandemic, and then some major highs coming out of that time are in the past. With some rising indices balanced with some low economic markers means, "companies are facing a year of unknowns after a couple of years of predictability."

Check out the full report to see specific index growth and analysis which is available to IHEA member companies. For membership information, and a full copy of the 11-page report, contact Anne Goyer, executive director of IHEA. Email Anne by clicking here.