We are now more than half way through 2013 and in the US this year’s economy feels much like last year’s. We are moving ahead, but slowly. The recovery remains spotty with forward momentum being driven by a few major bright spots. Fortunately, the industrial gas industry is a player in that handful of markets. In this report we look at how industrial gas players and independent gas distributors performed in 2012 and in the first half of 2013, with a focus on industry trends.
As readers learned in our worldwide market report (“A Hesitant Recovery,” CryoGas, January 2013, p. 26), energy, the environment, and healthcare are driving volume and the push toward providing increasingly sophisticated gases and applications both within and outside the scope of the traditional industrial gas business. The US is producing shale oil and gas on a large scale using fracturing with energized fluids, which is exploding demand for carbon dioxide and nitrogen. The automotive industry is driving steel production, which is now running at over 95 million tons per year and is a big user of ASU oxygen. And biotech is a fast growing segment for specialty gases.
The US Economy
US Real gross domestic product (GDP) rose 2.2 percent in 2012, compared with an increase of 1.8 percent in 2011, according to the Bureau of Economic Analysis (bea.gov). GDP increased 1.8 percent in the first quarter of 2013, a big improvement over the 0.4 percent increase in the fourth quarter of 2012. We are less optimistic about 2Q13 GDP, which has not been released as we go to press, as the effects of the $85 billion reduction in government spending (i.e., sequester) make their mark on economic activity. Cryo- Gas International forecasts GDP growth for the year of about 1.8 percent, which represents a step back to 2011 levels.
While US GDP is a good indicator of overall economic strength, about two-thirds of its value is derived from consumer spending that is not directly related to the business of the industrial, medical, and specialty gas industry. Since over 70 percent of our industry’s business is derived from manufacturing, we look at the Federal Reserve Board’s (FRB) (federalreserve.gov) Industrial Production (IP) index, which measures the real output of manufacturing (74 percent of the total), mining, and gas and utilities, for trends.
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