Sunday Night Economic Assessment

The US Industrial economy continued its rapid rise out of recession last week (If pipeline scheduling is correct), as gas-flow delivery scheduling on US pipelines continued to ramp.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for its 8th week in a row, and is now at its highest point since March 21st. In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) it was red-hot all week.

The recent pattern of ongoing upward-revisions to previous estimates also bullishly continued (as facilities have to adjust to the quick ramp-up in implied productive demand).

On a sector-by-sector basis (see part "8" posts on the IV-CWEI site) the steel sector (which led the other groups to the downside with a 75% drop in scheduling) is now leading on the upside and has more than doubled since its worst month ever (May). The auto sector (which also looked good good earlier this month), however remains in the dog-house, and Michigan (Robry's home state) remains in the out-house.

Michigan's unemployment rate topped 15% in June (worst in the nation) with 20% (one-in-five unemployed) in some regions. Michigan is not yet following the gas-flow ramp of the US, and unless it does soon Michigan will be decimated when/if these folks unemployment runs out (and they cut back personal spending further... tightening Michigan's contraction).

The Paperboard-based Consumption Index pulled off just a bit from last weeks all-time high, though still well above year-ago levels.

I remain leery (based upon Automotive gas-flow scheduling) that the Consumption index is somewhat overestimating the gains in consumption. One handicap of the Consumption Index is (because it is derived from gas-flows into cardboard-box manufacturing) is it doesn't touch merchandise that isn't packed in cardboard boxes (like Automobiles). So with gas-flows suggesting softness in the Auto-Sector (Which the model does not represent) and strength in non-auto (Which the model does represent) the non-auto strength gets imputed into the whole of US consumption by the model.

Now this is not to say that the US economy isn't advancing (the gas-flows evidence numerous signs of a rapid ramp in the economy). It is, however, to say that the Consumption Index (and the Inventory Index that makes use of it) look too fast on the consumption ramp-up. (It is also to say that Robry's models need improvement!)

The Inventory Index (given the Consumption & Production Indexes) has now given up all of its overhang, and is extending its 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, and the ineptitude of the government/feds to address it.

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. Momentum, however, appears (at least for the time being) on the side of recovery, and until that momentum gets broken, I see the recovery continuing.



-Robry825

Sunday Night Economic Assessment

Gas flows suggest a continuing strong rebound within the US industrial economy last week (If pipeline scheduling is correct), with upward revisions to previous estimates now becoming a daily pattern (as facilities have to adjust to the quick ramp-up in implied productive demand) and what's left of the US' original "Big Three" was supposed to emerge from their "retooling" cycle.

In the dailies, scheduling of natural gas deliveries into industrial facilities started soft, then strengthened through the week on the heels of a strong rebound of the consumers ultimate money supply measure... the stock market.

On a sector-by-sector basis (see part "8" posts on the IV-CWEI site) the steel sector (which led the other groups to the downside with a 75% drop in scheduling) is now leading on the upside and has nearly doubled since its worst month ever (June). The auto sector (which also looked good good earlier this month), however absolutely rolled over and died in its dailies last week... and for the last few days has been its lowest ever. I am hoping that that has something to do with the retooling week being extended.

The Paperboard-based Consumption Index took off and set an all-time high last week... pushing well above its Mid-September-2008 pre-election peak... which occurred just before everything fell apart in late September.

I am increasingly suspecting (based upon Automotive gas-flow scheduling) that the Consumption index is somewhat overestimating the gains in consumption. The big handicap of the Consumption Index is (because it is derived from gas-flows into cardboard-box manufacturing) is it doesn't touch merchandise that isn't packed in cardboard boxes (like Automobiles). So with gas-flows suggesting softness in the Auto-Sector (Which the model does not represent) and strength in non-auto (Which the model does represent) the non-auto strength gets imputed into the whole of US consumption by the model.

Now this is not to say that the US economy isn't advancing (the gas-flows evidence numerous signs of a rapid ramp in the economy). It is, however, to say that the Consumption Index (and the Inventory Index that makes use of it) look too fast on the consumption ramp-up. (It is also to say that Robry's models need improvement!)

The Inventory Index (given the Consumption & Production Indexes) has now given up all of its overhang, and is extending its 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, and the ineptitude of the government/feds to address it.

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. Momentum, however, appears (at least for the time being) on the side of recovery, and until that momentum gets broken, I see the recovery continuing.



-Robry825

Sunday Night Economic Assessment

The recent rebound of the US industrial economy continued for its 6th week in a row last week (If natural-gas pipeline scheduling is correct), albeit at a slower pace than the last few weeks, as the Production Index (in terms of its 28-day moving average) pushed a little further above its May-28th bottom. In its dailies, scheduling of natural gas deliveries into industrial facilities were soft through the week.

Seasonally, we are in a "retooling" period (First 2 weeks of July) where what's left of the US Auto Industry (and supporting steel industry) slows down. The Production Index (above) should see past the aberration (as it is seasonally weighted to filter out such noise), however the raw daily data (posted on the IV CWEI site) will be skewed.

On a sector-by-sector basis (see part "8" posts on the IV-CWEI site) both the steel and automotive groups were among the strongest last week, continuing their rebound off of their worst month ever (June)... taken by me as a good sign as these have been at the core of the recessionary softness.

The Consumption Index remained well above year-ago levels (and just below its 2009-high set the previous week). Consumption is suggested by the gas-flows to be near but just below its Mid-September-2008 Pre-election peak... which occurred just before everything fell apart in late September.

The Inventory Index (If the other indexes are correct) has now given up all of its overhang, and has begun 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, and the ineptitude of the government/feds to address it.

There are times that political parties have to decide whom to represent... their voters... or their funders. The interests of those two groups can at times be diametrically opposed, and it seems those interests are becoming more and more opposed every year. On both sides of last falls elections, the choices over whom to serve (voter or funder) were abysmal. The Republicans disintegrated last year. The Democrats are disintegrating now. Unless we get some change that can really be believed in, the economy will eventually likewise dissintigrate, though for now ineptitude is making more friends than enemies... and the economy advanced again last week.

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. Equities have been soft, and the recent steep ramp-up in the Production Index slowed this week, seemingly in tandem with weakness in equities markets (Though the Consumption Index continues to hold its ground), and if equities softness continues it could very well cause consumers to cut back spending by means of a drop in their ultimate money measure... the stock market.

There is also 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. Momentum, however, appears (at least for the time being) on the side of recovery, and until that momentum gets broken, I see the recovery continuing.



-Robry825

Sunday Night Economic Assessment

The US industrial economy rebound continued (If natural-gas pipeline scheduling is correct) for its 5th week (in spite of weakness in equities) as the Production Index (in terms of its 28-day moving average) pushed further above its May-28th bottom. In its dailies, scheduling of natural gas deliveries into industrial facilities again hit a multi-month high on Tuesday before tailing off late week in preparation for the July-4th holiday weekend.

Seasonally, we also entered a "retooling" period (First 2 weeks of July) where what's left of the US Auto Industry (and supporting steel industry) slows down. The Production Index (above) should see past the aberration (as it is seasonally weighted to filter out such noise), however the raw daily data (posted on the IV CWEI site) will be skewed.

The Consumption Index remained well above year-ago levels and set a new 2009-high early in the week, before trailing off late week. Consumption is suggested by the gas-flows to be near but just below its Mid-September-2008 Pre-election peak... which occurred just before everything fell apart in late September.

The Inventory Index (If the other indexes are correct) has now given up all of its overhang, and will likely begin to carve out a large 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. Equities have been soft, and the recent steep ramp-up in the Production Index slowed this week, seemingly in tandem with weakness in equities markets (Though the Consumption Index continues to hold its ground), and if equities softness continues it could very well cause consumers to cut back spending by means of a drop in their ultimate money measure... the stock market.

There is also 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. Momentum, however, appears (at least for the time being) on the side of recovery, and until that momentum gets broken, I see the recovery continuing.



-Robry825