Monday, November 30, 2009

Sunday Night Economic Assessment

The US Industrial economy again advanced last week (if pipeline scheduling is correct), and consumer spending remains robust amidst a strong 2009 Christmas-shopping season

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) tallied its 24nd advance in 26 weeks, and now stands higher than at any time since September 29th, 2008. The measure (at 107.5) is just shy of 2008's September pre-plunge peak (108.1) and 2007's high of 110.2 (It bottomed May 28th at 86.7).

In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) the week was the again somewhat softer in its actuals, though in line given the normal seasonal declines of a Thanksgiving-week.

On a sector-by-sector basis (as per the "Part 8" posts) the steel delivery natgas scheduling remains very firm (steel has been front-and-center in the recovery) and we are having a good strong month (vs the previous month) in the paper, chemical, fertilizer, refining, auto, mining, building materials and Agriculture & Livestock groups.

Especially noteworthy in the part-8 posts is the Food sector, which has now plunged nearly 35% from its January-2009 peak. Gas-flows into food-manufacturing plants have been remarkably proportionate to the recession, prompting me more-and-more towards thinking it has captured consumer-confidence well throughout the recession by measuring Americas ultimate stress-coping mechanism... the fridge.

The Paperboard-based Consumption Index softened a bit more in its latest week. Within its dailies, the index was soft early in the week and strengthened abruptly Wednesday-on, in line with Thanksgiving seasonals. Over the past several weeks, the Consumption index has fallen short of the ramp implied by seasonal factors, presumably because it attained that ramp prematurely weeks earlier when the Christmas shopping rush looks to have begun early.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continues to drop and remains well-below pre-recessionary levels. Once inventory-rebuilding kicks in (assuming nothing tries to derail the economy), another meaningful surge in the industrial economy (and natgas demand) is unavoidable.

Of greatest concern to the US now has to be unemployment. I had hoped to see unemployment numbers starting to come down by now with numbers like these. They so far have not. Either the unemployment numbers are wrong... or something else is very wrong.

For investors, it probably means barn-burning fourth-quarter earnings reports from increased margins as companies make more from the odd-combination of rising revenues and steady-to-falling employment/wage expenses. But for the country as a whole, it is not good to have 10% unemployment lock in.

Perhaps businesses are afraid to hire, preferring to raise cash to meet perceived tax increases or health-reform-mandated payroll increases. Perhaps businesses are hindered by debt-repayment / liquidity concerns. Or perhaps there is a concern for a return to recession, or other emerging factors hostile to business health.

But whatever the reason, the business side of the economic equation is now the sticking point. Consumer confidence appears to be now flying (judging from the gas flows) while business confidence lags. As a vigorous economy requires vigorous participation by both consumers and industrial producers, trouble lays closely ahead if the confidence-imbalance remains... in the form of inflation... and rapid erosion of standard-of-living and economic potential.

We now find ourselves at a point where government must change gears, away from consumption-only stimulus to a more balanced, more-holistic across-the-board approach.

Can 60% govern on behalf of 100% to grow the economy?

Or will 60% diminish to 35% as the economy hits a wall?

Time will tell.



-Robry825

Monday, November 23, 2009

Sunday Night Economic Assessment

The US Industrial economy continued to push ahead (if pipeline scheduling is correct), consumer spending remains strong, and signs of a very early Christmas shopping rush are abundant.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) added its 23nd advance in 25 weeks, and now stands higher than at any time since October 2nd, 2008 (It bottomed May 28th).

In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) it was firm though off just a tad from the previous weeks blistering pace.

On a sector-by-sector basis (as per the "Part 8" posts) the steel delivery natgas scheduling remains very firm (steel has been front-and-center in the recovery) and we are having a good strong month (vs the previous month) in the paper, chemical, fertilizer, refining, auto, mining, building materials and Agriculture & Livestock groups.

The Paperboard-based Consumption Index again softened in its latest week, though in its dailies it gained ground and remains well above the Production Index, supporting the recent momentum of industrial recovery.

Within its dailies, the consumption index (though it advanced) did not attain the ramp implied by seasonal factors, presumably because it attained that ramp prematurely weeks ago when the Christmas shopping rush looks to have begun early.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continues to drop and remains well-below pre-recessionary levels. Once inventory-rebuilding kicks in (assuming nothing tries to derail the economy), another meaningful surge in the industrial economy (and natgas demand) is unavoidable.



-Robry825

Monday, November 16, 2009

Sunday Night Economic Assessment

The US Industrial economy greatly intensified the prior weeks surge (if pipeline scheduling is correct), consumer spending retained its strength, and signs continue to abound of a very early Christmas shopping rush.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) added its 22nd advance in 24 weeks, and now stands higher than at any time since October 8th, 2008 (It bottomed May 28th). The index commenced its third-leg up in the recovery at an extremely steep rate, which (if it continues) would suggest the US as a whole emerges entirely from recession within days.

In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) it was wild... with scheduled gas flows to industry increasing 8% from the prior week. For the natgas markets, it implies 13 BCF per week added to demand. The gap between the consumption index and production index has been arguing for such a sharp increase in manufacturing, as has the low level of the inventories measure.

On a sector-by-sector basis (as per the "Part 8" posts) the steel delivery natgas scheduling remains very firm (steel has been front-and-center in the recovery) and a good start for the month (vs the previous month) in the paper, chemical, fertilizer, refining, auto, building materials and livestock groups.

The Paperboard-based Consumption Index again softened in its latest week, though in its dailies it gained ground and remains well above the Production Index, supporting the recent momentum of industrial recovery.

Within its dailies, the consumption index (though it advanced) did not attain the ramp implied by seasonal factors, presumably because it attained that ramp prematurely weeks ago when the Christmas shopping rush looks to have begun early.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continues to drop fast and remains well-below pre-recessionary levels. Once inventory-rebuilding kicks in (assuming nothing tries to derail the economy), another meaningful surge in the industrial economy (and natgas demand) is unavoidable.

Question now becomes... are we now about to exit the recession with a 10% unemployment rate?

Six months ago, we had a demoralized consumer segment. The tables have turned. We now have a demoralized industrial segment, being dragged along to higher output seemingly grudgingly... by low inventory levels and robust consumption. This is actually a good argument for higher margins and a whale of a good fourth quarter... as events of the open market drive up margins to meet perceived risk. But it is also a good argument for inflationary pressures in 2010, unless that perceived risk abates.



-Robry825

Monday, November 9, 2009

Sunday Night Economic Assessment

The US Industrial economy surged ahead in the latest week (if pipeline scheduling is correct), consumer spending remained strong, and signs abound of a very early Christmas shopping rush.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) added its 21st advance in 23 weeks, and now stands higher than at any time since October 21st, 2008 (It bottomed May 28th). The index appears to have now began its third-leg up in the recovery at an extremely steep rate, which (if it continues) would suggest the US as a whole emerges entirely from recession within 3 or 4 weeks!

In its dailies (as evidenced by the "Part 7" industrial daily posts on the IV-CWEI site) the week was strong throughout and set a high for 2009 on Wednesday.

On a sector-by-sector basis (as per the "Part 8" posts) the steel delivery natgas scheduling remains very firm (steel has been front-and-center in the recovery) and a good start for the month (vs the previous month) in the paper, chemical, fertilizer, refining, auto, building materials and livestock groups.

The Paperboard-based Consumption Index again softened just a tad in the week, though in its dailies it remained firm and well above the Production Index, supporting the recent momentum of industrial recovery.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continues to drop fast and remains well-below pre-recessionary levels. (So fast it had to be redrawn on the chart above at a 50% lower sensitivity last week). Once inventory-rebuilding kicks in (assuming nothing tries to derail the economy), another meaningful surge in the industrial economy (and natgas demand) is unavoidable.

Lots of signs of an early and vigorous Christmas-shopping rush in the flows (paperboard, paper, refining, etc). With the Inventories measure so week, the retail, distribution and warehousing side may have been caught short on inventory, and consumers figured it out. I would not wait for Thanksgiving to start shopping this year... or you might not be able to find the kids just what they want!



-Robry825

Monday, November 2, 2009

Sunday Night Economic Assessment

The US Industrial economy pushed further ahead in the latest week (if pipeline scheduling is correct), while consumer spending remained strong.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) added its 20th advance in 22 weeks, and now stands higher than at any time since November 29th, 2008 (It bottomed May 28th). The index is has been holding at levels suggesting it has made up better than two-thirds 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 strong throughout and set a high for 2009 on Tuesday.

The basis for the Production Index (The "Part 8" Industrial Sampling) was slightly revised this week, due to re-weighting of its position within the broader scope of the EIA's monthly data.

On a sector-by-sector basis (as per the "Part 8" posts) the steel delivery natgas scheduling remains very firm (steel has been front-and-center in the recovery) and the Automotive group thankfully (For Robry's home state of Michigan) holds on to its mid-month increase.

The Paperboard-based Consumption Index again softened just a tad in the week, though in its dailies it remained very firm (seasonals are pushing the index a tad lower). The Consumption Index remains nearly 40% above the Production Index, supporting the recent momentum of industrial recovery. A hint of an early, exceptionally strong Christmas shopping season is in the gas flows.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) remains well-below pre-recessionary levels and is dropping fast. (The inventory measure had to be redrawn on the chart above at a 50% lower sensitivity starting this week). Once inventory-rebuilding kicks in (assuming nothing tries to derail the economy), another meaningful surge in the industrial economy (and natgas demand) is unavoidable.

Next hurdle continues (in my judgment) to be the health-care debate in congress. A whole lot of folks are watching this thing unfold, and I fear the reaction if congress blunders.

I am a "reinvent the wheel" type of person, and studying the economics side of the gas flows has changed my thinking dramatically the past couple of years. One thing I have learned recently, and come more and more convinced of, is the emotional aspects of people en mass. One current event, or one news report, can appear to change gas-flow patterns instantly. People pay attention to current events. People react. And in a state of heard-mentality people can rush forward in excitement... or in panic retreat.

If congress is seen to gamble away health-care reform on political posturing and ambitions, consumers may react harshly, and the economy stumble. If congress is seen to enact health-care reform that is harmful to business, then investors (and the whole of the productive side of society) may react harshly, and the economy stumble.

Again, the best thing the Dem's and Rep's could do... go into a closed room (with the camera's, lobbyists, and power-brokers left behind), give the Democrats 60% of what they want, the Republicans 40% of what they want (as per the 60/40 split in representation) and come out of the room to reassure both the productive class and consumptive class with a bill that would be supported by 70% of each party.

Right now, more than ever, we need wisdom, carefulness, and prudence from our leadership.



-Robry825