Led by improvements in production related indicators, the Chicago Fed National Activity Index (CFNAI) increased to -0.30 in May from 0-0.52 in April. The index’s 3 month moving average, CFNAI-MA3, decreased to -0.43 in May from -0.13 in April, marking the third consecutive reading below zero and its lowest level since October 2012. May’s CFNAI-MA3 suggests growth in national; economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
Last Thursday the Conference Board released its Index of Leading Economic Indicators for the month of May which showed an increase of 0.1 percent following a 0.8 percent increase in April and a 0.3 percent decline in March. Says Ataman Ozyildirim, economist at the Conference Board,
Despite month to month volatility, the LEI’s 6 month growth rate remains steady, suggesting that conditions in the economy remain resilient. Widespread gains in the leading indicators over the last six months suggest there is some upside potential for economic activity in the 2nd half of the year.
On Tuesday the US Department of Commerce released its advance report on durable goods for the month of May 2013:
- New orders for manufactured durable goods increased 3.6 percent. The increase, the third in the last four months, followed a 3.6 percent increase in April.
- Shipments of manufactured durable goods, up three of the last four months, increased 1.2 percent, following a 0.6 percent April decrease.
- Unfilled orders of manufactured durable goods, up three of the last four months, increased 0.8 percent following a 0.3 percent April increase.
- Inventories of manufactured durable goods in May, up four of the last five months, increased 0.1 percent. This was at the highest level since the series was first published on a NAICS basis in 1992.
On Wednesday the Bureau of Economic Analysis (BEA) released its third and final revision for GDP growth in the first quarter of 2013: “The output of goods and services produced by labor and property located in the United States increased at an annual rate of 1.8 percent in the first quarter of 2013. The second revision, made last month, pegged growth at 2.4 percent.
American Metal Market reported Tuesday that raw steel production rose 0.6 percent last week from the previous week, operating at an average capability utilization rate (ACUR) of 78.5 percent, compared to the corresponding week last year when mills operated at an ACUR of 74.8 percent. Thus far this year mills have produced at an ACUR of 76.8 percent, down from the same period last year when the mills operated at an ACUR of 78.8 percent.
According to Ken Mayland, economist for the Precision Machined Products Association the reports this week were mostly encouraging:
A lot of “stuff” left the loading docks in May. The order books-which will bolster future production-increased nicely. So factories had a pretty good month in May.”
“Inventories are running lean. We’re getting a drag from the tax increases and spending restraint behind us. The business surveys have recently improved. After a sluggish Q2, we could see the economy perk up in the second half of the year. So cautiously gear up for it!”
I’m all for that! We have been experiencing good months followed by poor months; a slow market brings downward pressure on pricing which has had its impact, also leading to a further reduction in margin as you move higher priced steel out the door. Just dig in and work hard, wait for the sun to shine on our industry again, which it most certainly will.
Have a great weekend,
God Bless America…..