US raw steel production inched up 0.4 percent last week as mills operated at an annual capability utilization rate (ACUR) of 77.9 percent. In the corresponding week last year mills operated at an ACUR of 80.9 percent. On the year mills have operated at an ACUR of 76.2 percent compared to the same period last year in which they operated at an ACUR of 79.7 percent. The problem with the numbers (aside from a generally sluggish economy) is that pricing has deteriorated by about 30%, squeezing margins on producer and distribution levels. US Steel announced a $73 million Q1 loss on the producer side while on the supply chain side A. M. Castle has reported a $10.6 million loss for Q1.

Regarding tax increases

According to the Atlantic, the president’s proposed tax hikes for his 2014 budget, would raise federal rates to their highest level in nearly 2 generations. The increases would affect earners at all spectrums of the income scale. The magazine writes “What won’t surprise you is that taxes are going up-way up – on the richest percentile (you know, the bad guys; entrepreneurs, successful small family businesses etc). What might surprise you (most of you already knew this was coming) is that taxes are also going up on just about everybody else too, despite the president’s campaign promise to not raise taxes on families making less than $200,000.” According to analysis by the bipartisan Tax Policy Center, the average effective rate would climb from 17% in 2009 to 24 % in 2023. The increases would not only affect the well off: while the effective tax rate for the bottom 20% of earners would stay around 5%, for the next quintile (those who still earn below the median income) it would rise from 10% to 13% or 14%. For median income earners, the average effective rate would go from about 14% to 17%. The bottom line, according to The Atlantic, is that if the president’s tax increases go into effect the federal government would collect the “highest share of the US economy…..since the 1970’s.” Effective tax rates hovered around 70% in the 1970’s.
On May 1, 2013 the Institute for Supply Management (ISM) issued its Purchasing Manager Index (PMI) of economic activity for April: The index registered 50.7 percent, a decrease of 0.6 percentage point from March’s reading of 51.3. Though lower, it indicates expansion in manufacturing for the fifth consecutive month, but at the lowest rate of the year.

Ken Mayland, PMPA Economic Consultant sees the ISM numbers as follows:

…If the current reading of 51.3 were sustained, it would tend to be consistent with 2.7% real GDP growth (annualized). Over the past three years the economy has had a tendency to be stronger in the first few months of the year and then subsequently seeing growth fade….with the PMI now down for 2 straight months, is the pattern being repeated? Not exactly. Whatever the causes of the spring swoons from 2010 to 2012, there are probably more clear causes this year: the $150 billion tax increases on individuals AND the approaching Affordable Care Act (ACA) “train wreck” (to quote Senator Max Baucus).”

The Dow crossed the 15,000 threshold this morning as the US economy added 165,000 jobs last month-higher than expectations-and the unemployment rate ticks down to 7.5%, the lowest rate since December 2008.

In US Census Bureau news released today
  • New orders for manufactured durable goods in March, down 2 of the last 3 months decreased 4.0 percent. This followed a 1.9 percent increase in February.
  • Shipments of manufactured durable goods down following 2 monthly increases decreased 1.0 percent following a 0.4 percent February increase.
  • Unfilled orders for manufactured durable goods, down 2 of the last 3 months decreased 0.7 percent following a 0.7 percent February increase.
  • Inventories of manufactured durable goods, down following 2 consecutive monthly increases decreased 0.1 percent, a revision from the previously reported 0.1 percent increase.

What a mixed bag of news! An economy in flux. There is good news in the numbers-and there is bad news in the numbers. Like I said last week, we will be slugging this thing out for several more years ( if my gut is right) unless by some stretch the balance of power changes in the Senate as a result of next years mid-term elections (and the House remains a conservative stronghold).

I feel sorry for our friends in the north and west getting pummeled by snow-in May. Here in Ohio, spring has sprung. We have just enjoyed a week of sunny temperatures in the upper sixties to near 80 degrees. It is beautiful here this time of year. The leaves are popping on the trees, summer flowers are pushing out of the ground, tulips bloomed this week and the lilacs are getting ready to pop. Yesterday evening I saw 2 bald eagles sparring in the air over the yard. There are nesting pairs living on the reservoir which is very close by. What a sight to see! Had my 2 year old grandson out trying to catch a fish or two from my small pond-no luck-yet! He will catch a fish this year….

Wishing you all a super great weekend….
God bless America