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
