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).