US steel demand
Real estate indicators
- Construction activity has generally been strong in 2015. Annualized total construction spending in the United States has exceeded the $1 trillion level for seven consecutive months.
- Building permits and housing starts act as leading indicators of the residential construction activity. October building permits rose 4.1% to an annual rate of 1.2 million.
- However, housing starts fell 11% month-over-month in October to a seasonally adjusted annual rate (or SAAR) of 1.1 million in October.
Nonresidential construction activity
The Architecture Billings Index (or ABI) is a leading index of nonresidential construction activity. The index is based on a survey of architects. The participants are asked whether their billing increased, decreased, or stayed the same in the month. A value above 50 indicates an increase in billing. This index serves as a leading indicator for the nonresidential construction industry.
Simply put, an increase in architectural billing means more buildings are expected to come up in the future. Higher construction activity leads to higher demand for steel products such as rebars, joists, and girders. The ABI stood at 53.1 in October. The index has been more than 50 in seven out of ten months through October, as you can see in the above graph.
Nucor (NUE), the largest steel supplier to the nonresidential construction sector, sees nonresidential construction spending rising 5%–6% in 2015. Currently, Nucor forms 0.16% of the Vanguard High Dividend Yield ETF (VYM).
In the next part of this series, we’ll look at some other indicators of US steel demand.