KOHLER, Wis. For metal markets such as copper to improve there needs to be stronger overall growth in the United States, according to economist Peter Morici.
Morici said he is less optimistic than others about how strong the U.S. and global economies will be in the coming two years, but there is nonetheless some slight growth on the horizon, he said at the Metals Service Center Institutes Copper and Brass Products Division Conference in Kohler, Wis.
He said he expects the U.S. economy to grow more rapidly in 2014 than this yearhe projects gross domestic product growth of about 2.3 percent compared with a projected 2 percent growth in 2013but others are more optimistic. "If theres optimism about the economy, its good for metal prices, but now how long can that be sustained?"
Based on historical trends, the U.S. economy should be able to grow 5 percent year over year despite the recession, said Morici, a professor at the University of Marylands Robert H. Smith School of Business.
U.S. policy is the main culprit behind the slow growth, he said. Solutions include curbing the federal deficit through health-care and social security reform, restructuring banks, replacing Dodd-Frank, reforming regulations and taxes and fixing trade issues with China, Morici said.
The United States is too reliant on China for trade, which is why the metals industry has been affected by the sluggishness of that countrys economy, he said.
However, there are also some positive indicators for the metals industry, such as stronger housing starts and auto sales, Morici said. "If you build houses, you also build strip malls, which use steel, copper, aluminum. Then you need appliances (and) fixtures, so a robust housing market and new home construction is an important indicator of where were going."
Morici said he expects housing starts to grow from 780,000 starts in 2012 to 1 million this year and 1.2 million by 2014.
The number of housing permits grew to an annual rate of 974,000 in May, up 20 percent from 806,000 in the same month last year (amm.com, June 19).
Auto sales also are expected to grow year over year because the technology in vehicles are much better than in years past, and people will replace cars sooner in order to drive better, high-tech vehicles, Morici said.
U.S. vehicle sales are expected to increase from 14.4 million units in 2012 to 15.4 million units this year and 16 million units in 2014, he said.