Sunday Night Economic Assessment

Natural gas pipeline scheduling continued to suggest an improving industrial economy last week, the Production Index (in terms of its 28-day moving average) rose for the fourth week in a row, pushing further off of its May-28th bottom. In its dailies, scheduling of natgas deliveries into industrial facilities hit a multi-month high on Wednesday before tailing off late week.

Within the industrial index, the much-beleaguered steel component once again edged higher last week (taken as a good sign of confirmation). Everything-Auto , however, again remained in the doghouse; and Michigan (Robry's home state) gas-flows remained a mess. A good sign for California... industrial gas-flows showed their second good weekly performance... hopefully a good sign for that state.

The Consumption Index also pushed higher to just under its 2009-peek two weeks prior. It remains well above its year-ago levels.

The Inventory Index (If the other indexes are correct) has now given up nearly all of its overhang, and will likely begin to carve out a deficit to year-ago levels... reflecting perhaps the long-term damage done to some industries (especially auto) by the length and severity of the recession.

Overall, I continue to believe the industrial-recession ended at the May-28th Production-Index bottom, and anticipate a turning in the employment numbers in the month(s) ahead. With the implied inventory overhang now gone, and production lagging consumption by a wide margin, I believe the recovery has (to borrow a term from nuclear physics) reached its point of critical mass. As long as consumption holds at current levels, production should ramp up very quickly to meet it.

That is not to say that the economy is free of risk. There is always the risk of news events (acts of war/terrorism, natural catastrophes, political events/blunders, etc) that could cause consumers to panic, leading to a "double-dip" type recession. It is to say, however, that momentum appears on the side of recovery, and that momentum would have to be broken.



-Robry825

Sunday Night Economic Assessment

The US economy continued in the right direction last week as the Production Index (in terms of its 28-day moving average) rose for the third week in a row, pushing further off of its May-28th bottom. In its dailies, scheduling of natgas deliveries into industrial facilities repeated the previous weeks unusual pattern of midweek softness before strengthening late.

Within the industrial index, the much-beleaguered steel component continued to edge higher (taken as a good sign of confirmation). Everything-Auto , however, again remained in the doghouse; and Michigan (Robry's home state) gas-flows remained a mess. In the last couple of days, California industrial scheduled gas-flows showed a very respectable surge... hopefully a good sign for that state.

The Consumption Index eased off a bit after reaching its 2009-high the week below. It remains well above its year-ago levels.

The Inventory Index (If the other indexes are correct) has now burned off nearly 85% of its overhang, suggesting that the bulging gap between the Production and Consumption indexes is unsustainable and (if consumption holds) that production will have to ramp very quickly to meet consumer demand.

I also anticipate (with the strengthening steel gas-flow scheduling) that raw materials pricing will start to move upwards, as some industries scramble to quickly load up their warehouses with cheaply-priced raw materials while they still can.

Overall, I believe the industrial-recession ended at the May-28th Production-Index bottom, and anticipate a turning in the employment numbers in the month(s) ahead. With most of the implied inventory overhang now gone, and production lagging consumption by a wide margin, I believe the recovery has (to borrow a term from nuclear physics) reached its point of critical mass. As long as consumption holds at current levels, production should ramp up very quickly to meet it.


-Robry825

Sunday Night Economic Assessment

The US industrial economy appeared to continue to ramp last week as the Industrial Index (in terms of its 28-day moving average) pushed further off of its May-28th bottom. In its dailies, scheduling of natgas deliveries into industrial facilities softened midweek then restrengthened through yesturday.

Within the industrial index, the much-troubled steel component continued to edge higher (taken as a good sign of confirmation). Everything-Auto , however, remained in the doghouse; and Michigan remains a mess.

Consumption also appeared strong, as the consumption index managed to beat its April-high before settling down midweek.

The Inventory Index (If the other indexes are correct) has now burned off 3/4ths of its overhang, suggesting that the bulging gap between the Production and Consumption indexes is unsustainable and (if consumption holds) that production will have to ramp quickly to meet consumer demand.

Overall, I believe the industrial-recession ended at the May-28th Production-Index bottom, and anticipate a turning in the employment numbers in the month(s) ahead. With most of the implied inventory overhang now gone, and production lagging consumption by a wide margin, I believe the recovery has (to borrow a term from nuclear physics) reached its point of critical mass. As long as consumption holds at current levels, production should ramp up to meet it.


-Robry825

Sunday Night Economic Assessment

The recession is over. That is the message in the gas-flows today, as the production index finally broke its 9-week string of declines last week on quickly-ramping industrial gas-flow scheduling, continued gains were seen in the consumption index, and the Inventories index continued its steep decline... giving up now better than 2/3rds of its former overhang.

Higher natgas imputs into industrial facilities are consistent with higher production, higher profit margins (or declining losses), and higher employment (we have likely begun rehiring), so I suspect May will be the top of the unemployment spike in most states..... except.....(gulp)..... perhaps Robry's home state of Michigan. Michigan remains a mess!

Within the production index last week (on a daily basis) most industry groups (with the noteworthy exception of automotive) continued improvements in their dailies. Even the much-beleaguered steel group turned and showed a minor scheduling improvement. Overall, I took it to be a fourth good week-in-a-row economically (if the data is correct), though everything-automotive continued to suffer.

Overall, the recovery to me looks to be both progressing and loosing its fragility. With most of the implied inventory overhang now gone, and production lagging consumption by a wide margin, I believe the recovery has (to borrow a term from nuclear physics) reached its point of critical mass... where a recovery is self-perpetuating, fueling itself on waves of rehiring, consumer-income gains, and consumer-spending gains... until its fuel (of excess manufacturing capacity) is finally spent and the federal reserve has to step in and raise rates to cool the whole thing off... or until government wises up to the dual needs of both consumers and producers.


-Robry825

Sunday Night Economic Assessment

The Consumption Index is hinting again that the recession is over (at least in the eyes of the consumer) as paperboard-gas-flow scheduling (on which the index is based) inched above year-ago levels last week. The good weekly showing was the third in a row, and extends further the index's recovery from its late-December-2008 deep bottom.


The production Index again bucked the trend, however, and fell to its ninth recession low in as many weeks (though it continues showing a bit of strength in its dailies) as industrial natgas flow scheduling (though higher from previous days) could not make up for the extreme early-May weakness.


Within the production index last week (on a daily basis) many industry groups (with noteworthy exceptions of automotive and steel) continued improvements in their dailies. Overall, I took it to be a third good week-in-a-row economically (if the data is correct), though everything-automotive is still suffering.


The new Inventory Index again suggested (if both the Production and Consumption Indexes are right) that industry has been using the recent spurt in consumption to clear out inventory-clogged supply channels (as opposed to increasing production) and also suggests that better than half of the implied inventory overhang may have been worked off. I continue, however, to remain leery that a rising dollar combined with lowered shipping costs might also provide an alternate explanation to the recent weakness in industrial & steel gas-flows. Waves of steel-imports have decimated the US steel industry in past periods of recessions and oil-price weakness. The same could be happening today.


Overall, the recovery to me looks to continue to remain intact, though fragile. It may be that industrial production may have to remain soft (with little in the way of rehiring) until excess inventories are worked off. If consumption can hold, perhaps the fragility of the economy will end once inventories are down to acceptable levels... where production can lift back up to consumption, leading to waves of rehiring producing further waves of stimulus.


Equities remain a concern. Markets appear to be drawing some resistance, and with little in the way of direct consumer-stimulus other than a rising stock market (oil has turned up and falling natgas won't matter much until heating season) the whole of the economy is probably dependent on equities.


Another concern will be the much-anticipated GM bankruptcy-progression this week. If GM does indeed file, and we get a big wave of supplier shut-downs (as we did with Chrysler), and the media feeds a lot of gloom-and-doom to consumers, we might get another wave of recessionary-softness (as we did a month ago).



-Robry825