Sunday Night Economic Assessment

The US Industrial economy continues to advance (if pipeline scheduling is correct), amidst surging consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) collected its 16th advance in 17 weeks, and now stands higher than at any time since December 1st, 2008 (It bottomed May 28th), and at levels suggesting it has made up better than 65% of it's recessionary deficit. In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) the week started strong, then moderated just a bit mid & late week.

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) continues to lead on the upside and has tripled (up 255%) since its worst month ever (June).

The September strength continues to be very broad based, including the paper, chemical, refining, mining, and metals sectors. The auto sector, which also started the month strong, is again back-peddling (an early-month-strength-late-month-weakness pattern that has repeated itself in recent months). Michigan (Robry's state) remains a mess.

The Paperboard-based Consumption Index surged all week, closing out the week at an all-time high. The Consumption Index remains well above the Production Index... supporting the recent momentum of recovery.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) remains well-below pre-recession levels, adding inventory-rebuilding as another support-mechanism near-term to the economy.

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, production lagging consumption by a wide margin, and inventory-estimates sharply down going into a stimulative Christmas season, I believe the recovery has (to borrow a term from nuclear physics) reached its point of critical mass, and the economy will continue to sharply accelerate until overheating forces the feds to kill it off (to limit inflation).

That is not to say that the economy (in the mean time) 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 and stop spending, leading to a "double-dip" type recession. Momentum, however, remains overwhelmingly on the side of recovery, and until something immense breaks that momentum...I expect the recovery to continue.




-Robry825

Sunday Night Economic Assessment

Another very strong week for the US Industrial economy (if pipeline scheduling is correct), amidst restrengthening consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) racked up its 15th advance in 16 weeks, and now stands higher than at any time since December 8th, 2008 (It bottomed May 28th), and at levels suggesting it has made up better than 65% of it's recessionary deficit. In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) the week was again red-hot all the way through.

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) continues to lead on the upside and has tripled (up 255%) since its worst month ever (June).

The September strength continues to be very broad based, including the paper, chemical, refining, mining, and metals sectors. The auto sector, which also started the month strong, is again back-peddling (an early-month-strength-late-month-weakness pattern that has repeated itself in recent months).

The Paperboard-based Consumption Index also restrengthened. Though slightly below year-ago levels (which benefited from a bit of political-convention euphoria), the Consumption Index remains well above the Production Index... supporting the recent momentum of recovery.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) remains well-below pre-recession levels, adding inventory-rebuilding as another support-mechanism near-term to the economy.

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, production lagging consumption by a wide margin, and inventory-estimates sharply down going into a stimulative Christmas season, I believe the recovery has (to borrow a term from nuclear physics) reached its point of critical mass, and the economy will continue to sharply accelerate until overheating forces the feds to kill it off (to limit inflation).

That is not to say that the economy (in the mean time) 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 and stop spending, leading to a "double-dip" type recession. Momentum, however, remains overwhelmingly on the side of recovery, and until something immense breaks that momentum...I expect the recovery to continue.




-Robry825

Sunday Night Economic Assessment

The US Industrial economy continued to push ahead last week (if pipeline scheduling is correct), consumer spending softened, and the US Administration made a major tactical blunder in the area of international trade.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) collected its 14th advance in 15 weeks, and now stands higher than at any time since January 5th (It bottomed May 28th), and at levels suggesting it has made up better than 50% of it's recessionary deficit. In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) the week looked strong all the way through and closed out above the prior week... which was remarkable as the most recent week had one less work-day due to the Labor-Day holiday.

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) continues to lead on the upside and has tripled (up 255%) since its worst month ever (June).

The early-September strength continues to be very broad based, including the paper, chemical, refining, mining, and metals sectors. The auto sector, which also started the month strong, is again back-peddling (an early-month-strength-late-month-weakness pattern that has repeated itself in recent months).

The Paperboard-based Consumption Index conversely gave up a little more ground last week. Though slightly below year-ago levels (which benefited from a bit of political-convention euphoria), the Consumption Index remains well above the Production Index... supporting the recent momentum of recovery at least for the time being... though they are getting close on the dailies.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) remains well-below pre-recession levels, adding inventory-rebuilding as another support-mechanism near-term to the economy.

Of great concern, however, is a major blunder of the US Administration in bypassing the World Trade Organization in its recent decision to pursue tariffs against China against imported tires. This was an unbelievable lapse of judgment, and China immediately retaliated (another error on their part) against US autos and poultry... spooking the international markets even as I type this up (Sunday Night).

With China's massive trade surplus with the US, with China's massive US dollar holdings, and China's historic dollar-pegging, a large monetary & trade bubble is in place, and if this bubble pops suddenly (as opposed to relieved slowly) shock waves could circle the globe.

Should the US dollar suddenly dive against China, it could cause severe recession in China by way of sudden loss of export-related trade, a burst of inflation expectations in the US, an intrinsic loss of perhaps a trillion dollars (or more) in Chinese currency holdings, renewed recession in the US by way of consumer pessimism crimping off consumer spending (reigniting recession and perhaps depression)... all through global market turmoil.

Both the US and China would do well to step back from all of this (QUICKLY... LIKE MONDAY MORNING BEFORE US MARKETS OPEN) and defer all this properly to the WTO. Otherwise we will have to hope the markets choose to look the other way.

It will be an interesting day... Monday...



-Robry825

Sunday Night Economic Assessment

Another big week last week... The US industrial economy continued its advance (If pipeline scheduling is correct)... racking up its 13th advance in the last 14-weeks as the US continues to fight its way out of recession.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) now stands higher than at any time since January 10th (It bottomed May 28th), and at levels suggesting it has made up better than 50% of it's recessionary deficit. In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) the week was again red-hot, starting off strong and gaining further strength as the week progressed.

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) continues to lead on the upside and has tripled (up 255%) since its worst month ever (June).

The early-September strength was very broad based, including the paper, chemical, refining, mining, metals, and even (finally) the auto sector.

The Paperboard-based Consumption conversely gave up a little ground, and remains below year-ago levels (which benefited from a bit of political-convention euphoria... right before the bottom fell out of everything).

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 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