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.