Sunday Night Economic Assessment

The US Industrial economy took a Christmas- break and eased off a notch last week (if pipeline scheduling is correct), while by reinvigorated consumer spending continued in holiday-earnest.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of four up-weeks in a row, edging down to 120.2 (from last weeks record 120.3). In its dailies (See the "Part 7" posts on the Investor Village site) the index started off firm and held its strength until late week when Christmas eve approached.

The Consumption Index had its third weekly gain in a row, recovering to 137.8 (from last weeks 130.3). In its dailies the measure (as last week) remained a tad soft but remained very strong relative to the previous several weeks..

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to accelerate in is resumption of its long-term decline.

Overall, the economy looks to be continuing its recovery from its November "micro-recession", as gas-flow-estimated consumption has regained its composure. Within the individual sectors tracked (see "Part 8" posts on the Investor Village site) the metals group (and in articular the steel group) continue to show good progress in recovering from their November-lows.

The steel group sampling (rising to 172 mmcf/day in December vs its 147 mmcf/day 16-month low in November) is especially reassuring as it has been a bellwether of the recession over the past couple of years (as it should... given the prominent usage of metals used within industrial production, especially in durable goods).

One warning sign that remains, however, is the Food group, which leapt in November to surplus and is now approaching 2008-recession highs. The Food group has a contra-relationship with consumption, and gains to the measure generally coincide with weakness in consumer spending. I take it as a sign of deep nervousness within consumers, who (given the strength in the consumption index) are presumably continuing to spend even while nervous... hopefully reflecting unfounded nervousness in the future of others, rather than themselves.

Overall, the US industrial economy looks (as last week) to be firmly underpinned by an excess of consumption over production, the recent surge in consumption, and the resumption of declining Inventories measure.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy pushed ahead last week (if pipeline scheduling is correct), buoyed by reinvigorated consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for its fourth week in a row, rising to 120.3 (from last weeks 119.8), and edging out its May-30th record high of 120.2. In its dailies (See the "Part 7" posts on the Investor Village site) the index started off on the firm side then softened just a tad as the week progressed.

The Consumption Index had its second up-week in a row, recovering to 130.3 (from last weeks 123.3). In its dailies the measure softened just a tad but remained very strong relative to the previous several weeks..

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) broke its string of two-unchanged weeks, resuming its long-term decline.

Overall, the US industrial economy looks now to be strongly underpinned by an excess of consumption over production, the recent surge in consumption, and the resumption of declining Inventories measure.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy gained again last week (if pipeline scheduling is correct), consumer spending strongly reversed course and turned up, and the consumption index re-crossed the production index (on extremely strong dailies) into positive territory.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) climbed for its third week in a row, lifting to 119.8 (from last weeks 119.0). In its dailies (See the "Part 7" posts on the Investor Village site) the index waffled... softening early and staying soft through most of the week before firming up late.

The Consumption Index broke its string of six down-weeks in a row, gaining to 123.3 (from last weeks 116.9). In its dailies the measure had a very dramatic reversal... started the week strongly and maintaining its firmness through to the weeks close.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) was unchanged for its second week in a row (at 18.4). In its dailies it crossed into inventory declines again on Thursday, along with the Production/Consumption index crossing.

Last week was a very dramatic week (according to the gas-flows), as natural-gas-flows into paperboard facilities ignited... suggesting consumer-caution abated abruptly about a week ago. The gas-flow dailies suggest what could best be described as a very deep micro-recession... an approximately one-month plunge in consumer-spending... beginning November 3rd (in the dailies) slowly, climaxing November 28th, then ending by December 1st.

The consumption-pause coincided very nicely with the November elections (started the day after and built progressively downward thereafter), and seemed (from my viewpoint) very consistent with positive press about a likely Democratic/Republican "Deal" of a continuation of extended unemployment benefits and avoidance of planned/scheduled tax increases at the end of 2010.

My assumption is that consumers foresaw a drop to their incomes forthcoming with the turn of the elections and compensated... cutting and over-cutting spending "just in case".

I am very glad for the governmental compromise... I believe we likely averted something bad last week.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy edged higher again last week (if pipeline scheduling is correct), consumer spending remained week, and the consumption index (for the first time since March-2009) crossed the production index.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for its second week in a row, lifting to 119.0 (from last weeks 117.9). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index had another good week, exiting the Thanksgiving-weekend shutdowns on a firm footing and working higher to a record high to close the week Friday.

The Consumption Index however continued its sharp decline (6th down-week in a row), falling to 116.9 (from last weeks 120.8). In its dailies the measure started the week extremely soft, firmed slightly midweek, and ended the week somewhat flat.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) was flat on the week, though in its dailies it crossed into inventory builds on Monday Morning, along with the Production/Consumption index crossing.

Technically the recovery (for the moment) has ended, and momentum is to the downside until consumers regain their confidence.

We got a big positive break in terms of press last week, as the weak employment numbers were questioned in the press and press talk of a "Bush-Tax-Cut-Deal" seemed supportive (we actually had a small bounce in the production index dailies Thursday, and talk of an impending unemployment-and-taxcut-extension deal probably will probably help as well in the short term.

However, the economy can now be compared to a child perched on top of a cliff with its toes curled up over the edge. One wrong step... and there will be no opportunity for a "right step" anytime soon.

Thursdays employment numbers were (in my judgement) the real deal. Although pipeline gas flows showed gains to industrial gas flows in November (up 0.054 BCF/day vs October as per the "Part 7" posts on the InvestorVillage site), the combination of Refining, Fertilizer, and Ethanol flows accounted for all of that and then some (up 0.064 BCF/day vs October combined), leaving everything else negative.

Refining, Fertilizer, and Ethanol are not as employment intensive as other sample groups (such as the metals... which were down in November). In terms of raw (non-seasonally adjusted numbers) November was a lackluster, slightly down-month.

With the overwhelming weakness in the Consumption Index in November, The retail sales figures (to be released December 14, 2010) look to be dismal as well.

Expiring unemployment benefits and expiring tax-cuts will both drain from consumption. Lets hope we get that "Impending unemployment-and-taxcut-extension" deal soon!




-Robry825

Sunday Night Economic Assessment

The US Industrial economy turned and edged up last week (if pipeline scheduling is correct), amidst retreating consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of three weekly declines in a row, gaining to 117.9 (from last weeks 117.2). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index had a very good week, starting firm and working higher midweek to a record high on Wednesday before the Thanksgiving-weekend shutdowns.

The Consumption Index (on the other hand) continued its sharp decline (5th off-week in a row), falling to 120.8 (from last weeks 127.3). In its dailies the measure started the week soft and ended very weak, to levels not seen since September 2009.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) on a positive note has slowed its decline marketdly on the narrowing of the gap between consumption and production, and may be looking to put in its first weekly advance in nearly two years next week.

Technically (and probably emotionally) the recovery (as last week) remains intact with the consumption index barely above the production index, although risk to the US economy appears very high for the moment, with the post-election loss of inertia (especially to consumption).

However, on the dailies the consumption index is now solidly below the production index, and unless consumption can turn quickly (like this week) we are going to get a crossing of the two indexes and whatever we have left of our economic inirtia will be lost.

Furthermore, as the consumption index dailies came off sharply right after the election, we are probably looking at a really ugly suprise once the "Official" Retail Sales numbers come out for November, which (if everything goes wrong) could bread a lot of negatism in the press (which in itself could hammer the recently-surging markets and further build that negativism)... causing consumers to stop in their tracks... and bringing the hole economy back down into recession. With unemployment at 9 1/2% plus, the last thing one wants to see is slowing consumption.

One hope is the optimism on the business/investment side. With the inventories measure so low, there is (if the inventories measure is correct) ample room for inventory-build. And if businesses get confident enough (they got a good push from the November elections) they could (in theory) get to the point where they decide to run up inventories and go out and compete for market-share, which could help to underpin the economy for a short time to give consumers a chance to regain their bravery.

Still, this whole thing looks scary to me, and I am very uncomfortable at the thought of an index crossing by means of plunging consumption. Risk remains to look extremely high to the economy and the markets right now. We really, really, do need to see those volatile consumption-dailies turn back up... and quickly.

Pending negatives that certainly bear on optimism also include the expiration of the "Bush" tax-cuts (Consumers spend less on consumption so they can spend more on tax payments), and potentially-expiring extended unemployment-compensation benefits(Consumers spend less on consumption because they have less income).

Now, if Democrats and Republicans can come together and make a trade (Bush-Tax-Cut-Extensions for Unemployment-extensions). And if we can get a good spin out of the press somehow on the dismal retail sales report to come (Retail sales were down only because of abnormally high sales in 2009, but were higher than other years?). And if Santa can give everybody cash this year (Instead of all those trinkets that end up thrown in the closit or tossed the day after). And if the Good-Tooth farry raises her rates to $500-per-tooth in 2011, And if...

Aw, forget it !!!




-Robry825

Sunday Night Economic Assessment

The US Industrial economy continued its post-election retreat last week (if pipeline scheduling is correct), as both industrial production and (especially) consumption backtracked.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gave ground for its third straight week, dropping to 117.2 (from last weeks 118.1). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index actually looked supportive, starting the week very soft but firming up mid-to-late week, though it had trouble keeping up with seasonals.

The Consumption Index continued its sharp descent (4rd off-week in a row), falling to 127.3 (from last weeks 133.2). In its dailies the measure started the week very depressed, firmed only modestly midweek, then softened again through the weeks close.

Technically (and probably emotionally) the recovery remains intact with the consumption index still above the production index, although risk to the US economy appears very high for the moment, with the post-election loss of inertia (especially to consumption). But we really, really, need to see those volatile consumption-dailies turn back up... and quickly.


-Robry825

Sunday Night Economic Assessment

The US Industrial economy again backtracked last week (if pipeline scheduling is correct), as industrial production softened late-week on the heels of a week-long plunge in consumption.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its second straight week, slipping slightly to 118.1 (from last weeks 118.5). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index was actually moderately firm throughout much of the week but softened sharply as the week closed.

The Consumption Index gave back a lot of ground (3rd off-week in a row), falling to 133.2 (from last weeks 140.8). In its dailies the measure extended and sharpened its pullback from its election-day peak, starting the week soft and declining sharply as the week progressed.

Overall, last week appears to be an important one... marking the re-emergence of risk (at least temporarily) to the economy, especially considering the coupling of rising equities and declining consumption. A decline in the markets (which itself is of sharply growing risk) would be (from a historical standpoint) additionally detrimental, and with last weeks loss of economic-inertia the full burden appears to shift to the Federal reserve.

Technically (and probably emotionally) the recovery remains intact. But we really, really, need to see those volatile consumption-dailies turn back up... and soon.


-Robry825

Sunday Night Economic Assessment

The US Industrial economy eased off just a bit last week in the wake of US elections (if pipeline scheduling is correct), as both industrial production and recently-strong consumption gave a little bit back.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of five consecutive weekly advances, slipping slightly to 118.5 (from last weeks 118.7). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week very soft, bottomed-out just before election-day, then rose with the markets as perhaps investors and business interests were satisfied by gains from their champions (the Republicans), who picked up control of the US House of Representatives as well as several senate seats and a host of governorships.

The recently red-hot paperboard-based Consumption Index also slipped (2nd off-week in a row) to 140.8 (from last weeks 142.5). Interestingly, the measure (opposite the Production Index) sharpened up quite nicely once the week began and actually peaked on election day, then weakened steadily into the close of the week and especially into the very-preliminary weekend data, as perhaps consumers looked to losses by their champions (the Democrats).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

Overall, its a big "nothing changed"... The US industrial economy continues to remain firmly supported by that ongoing excess of consumption over production.


With the US midterm elections giving Republicans a much larger say in what the Government does over the next two years, the Democrats chances to undermine and ruin the US economy alone are coming to an end, and the Republicans now get their chance to join them in keeping the ball bouncing downhill.

So, with tongue planted firmly in cheek, and a healthy warped sense of humor... Ten suggestions follow to help newly-elected Republicans join with Democrats to kill the economy...


1. MAKE LOTS OF TALK ABOUT SHUTTING DOWN GOVERNMENT! As millions of folks work for the government and therefore rely upon it for their salaries (and resultant spending for their families needs)... Scare the pants off of them by threatening to shut down government (and suspend their paychecks) in hopes that they cut their spending way back (just in case)... slowing their spending. It hopefully will produce a snow-ball effect as store-owners also cut back in reaction and anticipation. Better yet, start the negative talk right away so that you can scuttle the quickly-developing Christmas-rush. Time is of the essence!


2. MAKE LOTS OF TALK ABOUT ENDING EXTENDED UNEMPLOYMENT BENEFITS and add several million additional consumers into that pool from suggestion #1 above. The more folks you scare, the more folks will cut back spending, and the faster store and business owners will react, curtail hiring, and join in the layoff-party. You might even be able to ignite a downward spiral that could take unemployment to 15 or 20 percent!


3. GIVE EVERY CONGRESSMAN, SENATOR, AND THE PRESIDENT A 1-800 NUMBER, connected to a cell-phone that he/she must keep on his/her person at all times (switched on), but that may be only used by entities with "Corporation", "Association", "Mutual", "Pack", "Brotherhood", or "Union" in their names. All other folks should be connected by a $5.00 pay-per-minute phone service, connected by a voice-mail system that takes at a minimum 30 minutes to reach an active, working, answering machine, whose contents are to be sealed in the national archives (except by court order) for the next two years until the next election cycle (To prevent situations where conflicts of interests might arise).


4. ELIMINATE THE TERM "TORT REFORM" FROM YOUR VOCABULARY! A dirty little secret... open up your local "Yellow Pages" directory and count the number of pages listed in the "Physicians and MD's" section. Then count the number of pages in the "Attorneys" section. (If you are like me, you will probably find many more "attorneys" pages than doctors pages. Then consider the fact that attorneys earnings come from less than 50% of their take (the litigants get a larger portion). It is vital that litigation keep medical insurance costs in the $15,000+ range a year for consumers, and tort-reform threatens to free up thousands of that which consumers could potentially spend elsewhere, disastrously threatening to expand the economy via consumer spending.


5. MOVE IMMEDIATELY TO PROPOSE A "GOLD STANDARD"! Foreign central banks hold trillions of dollars worth of US debt, and allowing convertibility would quickly allow them to stock up on all the hard assets left in the US, relieving them of their burdens of risky US paper. And while you are at it, throw in silver, the SPR, the national parks, the US military, ANWR, and the like. With all their trillions, foreigners are going to need more stuff than just our gold stocks to convert into. If that is not enough, throw in farm-land, commercial property, and eventually US residences. You could call away peoples homes through some random means such as a negative lottery... Your number comes up, you loose your house! Folks could then protect themselves by buying "Lottery Insurance" (so they could purchase something and not be homeless), which would then add a revenue stream to the insurance companies to replace what is lost when you implement single-payer (oops, forgot that suggestion above) so thy wouldn't go out of business (remember Insurance companies are covered under suggestion #3 above)..


6. CONSIDER THE POSSIBILITY OF NEW CONSUMER TAXES including energy, gas, value-added, anything that could relieve consumers of income that would otherwise be spent by them in the general economy. The more spent by them on taxes, the more they will cut back on other purchases, slowing business and generating layoffs.


7. TALK UP THE NEED TO RAISE THE MINIMUM WAGE TO $10 AN HOUR... but absolutely, under all circumstances DO NOT ACTUALLY DO IT! The point here is to scare the business end of US society, so that they will do all they can to avoid new hiring to keep the economy depressed. But if you go through with it, it would actually stimulate consumer spending as low-income folk are much more likely to spend the extra income (as opposed to high-end business/investment folk, who would more likely just add it to their savings as they already would have more income than they know what to do with). Point here is to talk up the minimum wage hike on business shows and within business publications (Wall Street Journal, Investors Business Daily, etc) and not on the nightly news or other media outlets that consumers watch, lest they get excited and raise their spending in anticipation (stimulating the US economy).


8. PROSECUTE MICROSOFT AGAIN... Remember that Anti-Trust lawsuit against Microsoft years ago regarding Internet Explorer... it didn't go far enough. There's Defrag, Backup, Disk Cleanup, Wordpad, Notepad, Calculator, Windows Update, Outlook Express, all those freebie games, and hundreds of other Microsoft handouts that are bundled for free within Windows as well. Make consumers pay for 'em all. that way consumers will have less to spend elsewhere in support of the economy. And don't stop with Microsoft. Prosecute anyone that offers consumers anything for free.


9. IT IS HYDROCARBON JAWBONE TIME AGAIN... It's fall-time, when E&P's are drawing up their drilling plans & budgets for 2011. Always, always, demonize heavily anyone that drills for resources during the November/December time-frame when they are budgeting. The rest of the year you need not worry, but always demonize in November/December. Especially in oil. Everyone wants to play the hero, few the villain. You don't need to actually do anything, just use your rhetoric. Remember, less drilling means more imports, which means more foreign outflows of US capital, which means higher foreign holdings of US dollars. This suggestion goes hand-in-hand with suggestion #5 above.


10. ALWAYS REMEMBER, IT IS NOT THE OTHER PARTY THAT IS RUINING THE COUNTRY... IT IS THE PUBLIC THAT SUPPORTS THEM. Never criticize another in government, they are your partners. It is the public that is the problem. Isn't it?




-Robry825

Sunday Night Economic Assessment

The US Industrial economy pushed ahead again last week (if pipeline scheduling is correct), while consumers retreated.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for its fifth week-in-a-row, rising to 118.7 (from last weeks 118.3). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week very strong and tailed off just a bit as the week progressed.

The paperboard-based Consumption conversely broke its string of two up-weeks in a row, easing to 142.5 (from last weeks 143.8). In its dailies the measure started slightly soft and weakened sharply by weeks end.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. Unfortunately, the recovery retains its jobless look (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).

With the US midterm elections a mere day away, and the assumption (given the press and polls) of a Republican congressional landslide, the danger is on the side of a decline in consumption as consumers react to changes from a strongly pro-consumption anti-business government, to one more divided (and possibly gridlocked). The burden thus falls to the Federal Reserve to continue to stimulate, giving politicians a chance to regain sanity before we hit the inevitable wall that foolishness places before us.

Perhaps the best chance for the US economy is the defibrillator method... vote for anything that talks Republican, looks Republican, or smells Republican... in the hopes that it both re-stimulates investment and hiring by rekindling investment and expansion (and rehiring), while reminding Democrats that while consumers are important, so is the business community that serves the consumer.

Though when the vote is finished and done, rhetoric from both Democrats and Republicans will either make or break the fundamental possibilities of working together. If they tear each-others constituencies apart with their tongues, they will tear the economy apart as well.

But even then most of the burden stays with the Federal Reserve, on reversing the foolishness of the last 30 years. Eventually, the Feds are going to have to both raise interest rates and quantitatively ease (all at the same time), to bring down debt and reverse a money supply that is in reality negative to the tune of many trillions of dollars (except from the vantage point of foreign interests)... and restore sanity to dollar-denominated savings.

You can see what's coming in the gas flows... industrial production is on a tear throughout, likely running towards capacity even as business is frozen in its steps and employment suffers.

You can see what's coming in precious metals, as silver (the "poor-mans gold" of the metals markets) is surging on fears that the Federal Reserve does not know how to extract itself from the hole it dug itself into (lowering interest rates to zero, to preserve a run-up in debt, to replace monetary outflows generated by huge foreign trade deficits).

We are desperately out of balance. Changes have to be made.

Perhaps it will be like 1992, when Republicans swept Congress after President Clinton's first two years. The Republicans forced fiscal restraint, we eventually got a balanced budget, and the economy (and psychology) recovered.

Well, at least one can dream...




-Robry825

Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), with solid gains implied in both US Industrial Production and Consumption.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for its fourth week-in-a-row, rising to 118.3 (from last weeks 116.5). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started firm and remained robust through to the weeks close.

The paperboard-based Consumption Index added to its Fall-2010 surge, rising (for its second week in a row) to 143.8 (from last weeks 140.1). In its dailies the measure started firm though eased slightly through its close. The Consumption Index is nearing its Oct-2009 all-time high 146.5, suggesting perhaps we may be looking to a similarly-strong Christmas as we had in 2009.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. And the recovery looks to remain a jobless recovery (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).

In fact (looking at the gas flows), it is very difficult to be able to tell that we are in a "recession" at all. If one were to ignore the abysmal employment data and focus solely on gas-flows, that hole-of-a-recession we dug ourselves into during 2008 has already been filled, and we look about to boom. So why the present-day dismal unemployment?

Within the gas flows, the large gap between implied consumption and industrial production, the duration of that gap (18 months), the seemingly never-ending decline in the inventories measure (especially against the slow build implied within Industrial Production), and the recent reluctance of the Production Index to "break out" to the upside as the Consumption Index has done, all suggest extreme negativism (and caution) within the business & investment end of the US economy.

With such negativism in business and investment, capitol formation (investment) and labor formation (hiring) is severely impaired. Contrast that with the robustness of consumer-spending implied by the Consumption Index, and a terribly unbalanced economy (crafted by a terribly unbalanced political "economy") is betrayed.

With Midterm US Elections now 8 days away (judging by the polls)... the US public is on to this at least to some extent. And given recent press, that unbalanced political "economy" is about to change.

One has to be thinking now of voter fallout after the elections pass. Polls and press seem to be suggesting the possibility of strong Republican gains come November, and allude to I think favor a slim Republican recapture of the House of Representatives with strong Republican gains and a chance of Senate control as well.

But what will that (potential) change of political balance bring about? Will investors & business leaders (seeing the political changes) take heart and invest & hire to chase new business, or sit back and wait to see what happens? Will consumers loose confidence on the political fallout? Will a rebalanced government work wisely, or fall into combative stalemate to the ruin of the economy? Or, will the polls be proved to be wrong? Time will tell.

One thing I know... we have a lot of very sharp business people in the US, very creative workers, very motivated consumers, and a whole lot of people that want to see is this economy work. Just give them the chance...




-Robry825

Sunday Night Economic Assessment

The US Industrial economy again gained ground last week (if pipeline scheduling is correct), while the ongoing recent surge in consumer-spending inched even further ahead.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for its third week-in-a-row, rising to 116.5 (from last weeks 115.7). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week softened early (following a strong end to the prior week) but sharply firmed as the week progressed.

The paperboard-based Consumption Index reversed its prior-week dip, rising to 140.1 (from last weeks 139.9). In its dailies the measure vacillated but overall was firm through Friday.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. And the recovery looks to remain a jobless recovery (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).

With Midterm US Elections now 15 days away, one has to be thinking now of voter fallout after the elections pass. Polls and press seem to be suggesting the possibility of strong Republican gains come November, and allude to I think favor a slim Republican recapture of the House of Representatives with strong Republican gains and a chance of Senate control as well. Consumer spending appears robust the past few weeks, and equities are surging.

Now I can understand the equities rally (Republicans tend to champion the business & investment side of US society) but the strong consumption part is a mystery. As Democrats tend to champion consumers, and the press is so dismal for Democrats, are consumers somewhat unaware (with a big dip in consumption coming in late November/December once the surprise is out)?

Or... are consumers aware... and discouraged with their overall champions? These two possibilities both would have big implications.

If consumers are unaware, an economic reversal (and a big equities reversal within presently-rising stock markets) may be coming. If consumers are aware and discouraged... a Republican election rout throughout government... and whatever emotional shock waves follow that.

But beyond all that... what of the 2008 elections? Consumption fell off big time in the weeks proceeding the Democratic sweep of November 2008.

Consumption way down before the 2008 Democratic sweep... Consumption way up before a prospective 2010 Republican sweep. Are consumers Republicans? Am I misjudging something here? Or is the ever-emotional consumer voting out of emotion rather than conviction (or worse, out of emotion rather than knowledge)? Or... is the dog simply following it's tail!





-Robry825

Sunday Night Economic Assessment

The US Industrial economy pushed ahead last week (if pipeline scheduling is correct), while the ongoing recent surge in consumer-spending slipped back slightly.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for its second week-in-a-row, rising to 115.7 (from last weeks 114.5). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week soft but gained as the week progressed.

The paperboard-based Consumption Index conversely declined (breaking its streak of three up weeks in a row), dipping to 139.9 (from last weeks 140.9). In its dailies the measure started the week strong and tailed off only slightly through Friday. Preliminary weekend scheduling (For Saturday and Sunday) looks very strong... if it holds up... and the Consumption Index maintains its huge gap to the Production Index.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Overall, the US industrial economy looks to continue to be strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure.

It does, however, appear likely to remain a jobless recovery (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment that implies within the business and investment communities). Negativism is unlikely to chase down new employees to chase after new-business when old-business is in doubt. Perhaps November will change all that. Perhaps not.

Sooner or later though, that negativism (if not reversed) is going to bite deep and hard. The US standard of living is supported by massive imports, which are in turn supported by massive foreign demand for dollars (Think about it... why would foreign parties "dump" goods into the US at a loss, if it weren't for the desire for dollars. The loss on "dumping" is the "commission" on the dollar transaction!). Like all things that vacillate, sooner or later that foreigner-driven dollar-bullishness will abate, as will the desire to "dump"... and the imports will end. When those massive imports do end, either US industry (and investment) will have to rapidly expand to pick up the slack, or the US standard of living contract sharply.



-Robry825

Sunday Night Economic Assessment

The US Industrial advanced last week (if pipeline scheduling is correct), while consumer-spending added to its recent surge.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) finally broke its string of four down-weeks in a row, and inched higher to 114.5 (from last weeks 114.2). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week a bit on the firm side, then sharpened nicely through Thursday (to close out the month of October) before softening on Friday.

The paperboard-based Consumption Index also inched ahead (third up week in a row), rising to 140.9 (from last weeks 139.5). In its dailies the measure started the week flat to slightly firm but accelerated nicely through to the end of the week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Overall, the US industrial economy looks to continue to be firmly underpinned by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure.

Continuing concerns continue to be the dismal mood of the business/Investment side of the US citizenry (and its whithering effect on capitol/formation and new business starts), massive monetary outflows from the US (believed driven by demand from foreign sources for US dollars), and poor US monetary, fiscal, and political posturing.




-Robry825

Sunday Night Economic Assessment

The US Industrial economy eased again last week (if pipeline scheduling is correct), while consumer-spending inched ahead a little more.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined again (its 4rd down week in a row), dropping to 114.2 (from last weeks 115.2). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week soft, then firmed just a bit late-week. September (vs its seasonals) continues to look soft, especially in contrast to the month of August.

The steel sector looked quite strong last week (in spite of flat automotive scheduling). Steel lead both the recession and recovery over the past couple years, and climbing steel scheduling is quite a welcome sign for the possibility of a stronger November.

The paperboard-based Consumption Index gained a little more ground (second up weeks in a row), rising to 139.5 (from last weeks 139.2). In its dailies the measure started the week very strong through Tuesday, then declined sharply through Saturday before turning up somewhat Sunday (as if something spooked the public Tuesday night?).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Overall, the US industrial economy (in spite of the last 3 weeks) looks to continue to be firmly underpinned by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure.

Continuing concerns continue to be the dismal mood of the business/Investment side of the US citizenry (and its whithering effect on capitol/formation and new business starts), massive monetary outflows from the US (believed driven by demand from foreign sources for US dollars), and poor US monetary, fiscal, and political posturing.




-Robry825

Sunday Night Economic Assessment

The US Industrial economy gave back a little more ground last week (if pipeline scheduling is correct), while consumer-spending rose aggressively.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) backtracked (its 3rd down week in a row), dropping to 115.2 (from last weeks 116.2). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week firm, then softened a bit late-week. September (vs its seasonals) continues to look soft, especially in contrast to the month of August.

The paperboard-based Consumption Index conversely turned around and gained ground (breaking a string of three down weeks in a row), rising to 139.2 (from last weeks 134.0). In its dailies the measure looked strong.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Overall, the US industrial economy (in spite of the last 3 weeks) looks to continue to be firmly underpinned by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure.

Continuing concerns continue to be the dismal mood of the business/Investment side of the US citizenry (and its whithering effect on capitol/formation and new business starts), massive monetary outflows from the US (believed driven by demand from foreign sources for US dollars), and poor US monetary, fiscal, and political posturing.




-Robry825

Sunday Night Economic Assessment

The US Industrial economy backtracked slightly again last week (if pipeline scheduling is correct), as both industrial production and consumer-spending eased.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its 2nd week in a row, dropping to 116.2 (from last weeks 116.7). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week soft, then firmed midweek. In spite of the firming in the dailies, we are starting the month of September on the weak side, especially in contrast to August.

The paperboard-based Consumption Index also gave a little more ground (its 3rd down- week in a row), settling to 134.0 (from last weeks 134.2). In its dailies the measure looked strong (maintaining the prior weeks surge), though the "official" 28-day average (shown in the chart) could not reflect the strength as an equally strong week rolled off the back end of it's 4-week moving average.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Overall, the US industrial economy looks to continue to be underpinned by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure.

Continuing concerns continue to be the dismal mood of the business/Investment side of the US citizenry (and its whithering effect on capitol/formation and new business starts), massive monetary outflows from the US (believed driven by demand from foreign sources for US dollars), and poor US monetary, fiscal, and political posturing.




-Robry825

Sunday Night Economic Assessment

The US Industrial economy retreated last week (if pipeline scheduling is correct), as both industrial production edged down while earlier-reinvigorated consumer-spending is taking a two-week summer vacation

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its short string of 2 up weeks in a row and slipped back a notch to 116.7 (from last weeks 116.8). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index opened the week strongly and maintained its firmness through midweek... then stair-stepped down on September 1st, presumably on factory adjustments to production scheduling.

There is a propensity for the Production Index to stair-step up or down on the day a calender-month changes, and we saw a real good example of that last week. Industrial gas deliveries were modeled at 26.40, 26.31, 26.02, and 26.40 for the first four days of the week (which were also the last days of August). Then, for the last three days of the week (the first three days of September) Industrial gas deliveries were modeled at 25.19, 25.39, and 25.42. That works out to about a 4% drop in natural-gas inputs, which would imply a 4% cut in planned manufacturing of goods at these industrial facilities.

Now there is a wrinkle to all this... there could be distortions in the pipeline data itself (Holidays can produce such distortions, as can sudden fluctuations in climate (as we are having now as the natural-gas industry is just now leaving its summer-demand season and entering its fall shoulder-season). But September (at least in its first few days) looks weak.

Now seasonally, we tend to like to get a bump-up at the start of September (once seasonal-distortions surrounding Labor-day are factored out) so we should be going the other way. Even in 2008 (when the bottom fell out of industrial natgas deliveries) we got a bump up in early September (though things absolutely fell apart a few weeks later when the Economy rolled over). So we will hope the early September weakness is either a pipeline-distortion or something funny (unseasonal) regarding Labor-Day-Weekend scheduling.

Getting to the paperboard-based Consumption Index, it also backtracked (its 2nd down- week in a row), settling to 134.2 (from last weeks 135.0). In its dailies, however, the measure (though beginning the week soft) surged strongly as the week progressed, seemingly climbing with the stock market and suggesting the good press of the last week or so is encouraging consumers.

The Consumption Index is much more volatile than the Production Index, and has appeared in the past to reflect much more highly upon emotion as it tends to surge or crash in reflection to the "goodness" (or "badness") in the news of each day. Thus, as the highly-emotional Consumption Index tends to lead the more subdued Industrial Index, and the news of the day tends to lead consumption, the "mood" of the media can be the prime driver of an economy at times (probably one reason why authoritarian countries tend to try and control it). The past few weeks it seems we have had a manic-depressive media... speaking in the tone it believes its readers/watchers/listeners want to hear... back and forth between good and bad. Makes for a lousy economy.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Overall, the US industrial economy looks to continue to be underpinned by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure.

Continuing concerns continue to be the dismal mood of the business/Investment side of the US citizenry (and its whithering effect on capitol/formation and new business starts), massive monetary outflows from the US (believed driven by demand from foreign sources for US dollars), and poor US monetary, fiscal, and political posturing.

-Robry825

Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), as recently-strengthening consumer spending took a break.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for its second week in a row, climbing to 116.8 (from last weeks 116.0). In its dailies the index opened the week strongly and maintained its firmness through to the weeks close.

The paperboard-based Consumption Index, conversely, broke a string of 3 up weeks in a row, settling to 135.0 (from last weeks 135.7). In its dailies the measure began the week soft but strengthened just a tad as the week progressed, holding slightly above-trend to the ramping production index... a credit to the consumer in a tenacious couple-week period where (until late week) it seemed a strongly-negative slew of news-media reports begged to stall consumption.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.


I am going to forgo the usual comment section this week, as an interesting news article found its way to my email last Thursday. The article contrasted quite nicely with remarks I made a week ago in last Sundays economic assessment, and I want to explore that further. Rather than comment on the economy, I want to explore this whole experiment of a gas-flow-derived economic model...

Consider (from the Production Index Paragraph) from last weeks "Sunday Night Economic Assessment" (Sunday, August 22nd) ...
............"The Production Index (In terms of its 28-day moving average
............ of gas-flow scheduling into US industrial facilities) broke a string
............ of four down-weeks and rose to 116.0 (from last weeks 115.0)."

And contrast it with the lead from last weeks AP-reported unemployment piece...
............"New jobless claims drop for first time in 4 weeks
............
............ AP
............ WASHINGTON – New requests for unemployment benefits fell
............ sharply last week, the first decline in a month and a hopeful sign
............ after a raft of negative economic reports.")
............
............(http://www.google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HR7PR80)


On the whole, not a bad performance!

Now this is not to say that the model is perfect- it has had a bit of "noise" in it from time to time, but overall I do believe the modeling captured the beginnings of the recession in the fall of 2008, reflected its bottom in May of 2009, its recovery in late 2009 through Q1 of 2010, and the recent weakness through early August.

The theory behind the model is that by measuring the quantity of natural-gas that is fed into an industrial facility (that uses natural gas in its manufacturing processes), one can estimate (quite closely) the production of that facility based upon its natural-gas usage. If natgas usage goes up 10%, facility production goes up 10%. If natgas usage goes up 100%, facility production doubles. If natgas usage stops, the facility is idle.

Collect lots of data for lots of factories all across the US, and you get US production... daily... in real time, with no waiting for monthly surveys, quarterly adjustments, etc. No delays means no surprises, which means you can react immediately (not long, long after the fact).

The potential for this type of analysis is enormous for a country. It can give companies time to react to slowdowns to cut inventories (and costs) to prevent being blind-sided by a slowdown no-one sees coming, and it can give governments time to react to impending recessions to save economies, save industries, save jobs, and save families which otherwise could be impacted by layoffs, business-failures, and other financial hardships.

And enough data is out there (about eight percent of US industry) to get enough of a sampling to do a fairly decent daily model.

Now 10 years ago, this was not so. All this came about fairly recently, opened up by the wisdom of the US Federal Energy Regulatory Commission (FERC), which accurately foresaw the benefits of opening up tightly-controlled pipeline information to the public. In a slow process, all of the nations interstate pipelines were gradually required to make more and more of their detailed flow information public.

The FERC's push was not without controversy... some resisted to the disclosure of "Customer-specific" corporate information on the grounds of privacy, and in the early days long lists of vaguely-worded locations made them difficult to decipher. But little by little clarity came out and to this day, about 8 percent of US industrial gas usage (as measured by government EIA data) is available daily from the "Informational Postings" of US interstate pipelines.

All that is about to change.

In November-2008, the FERC issued a major rule-making order (FERC Order 720), in which (by way of then-recent congressional legislation) it saw its authority opened up to intra-state pipelines (pipelines that do not cross borders) as well. After revisions and clarifications (FERC rules 720A and 720B) a host of local intrastate pipelines (and local distribution companies) are now just beginning to be required to post detailed information, which should (if this process can unfold) greatly increase the quantity and quality of data to the public.

At this early stage (as it was in the early stages for the interstate pipelines) the data is vague, and a currently high threshold (15,000 MMBtu/day to be reportable) and allowances for vaguely-named point-descriptions seem to be limiting the data's usefulness. However, if the FERC can progress (as it did for the interstate pipelines) the quality and quantity of this new data could greatly improve.

If these "Sunday Night Economic Assessment"s have value to you, if they are a help, please consider the following. You can add to this process, and the quality of these reports, by supporting the FERC in all its efforts, by just a simple email.

If you would, sometime this fall, go into the FERC's website, and drop off an email to them in thanks for their efforts, and to encourage them to expand upon "FERC Order 720" in the years to come with "Final-Cycle" or "Actual-Flow" data for all industrial natural gas transactions... to increase transparency for the benefits of the markets, and the benefit of the nation as a whole.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy turned around and advanced last week (if pipeline scheduling is correct) as both industrial production and consumer spending gained, on the heals of last-weeks announced resumption of quantitative easing (purchasing of treasury debt) by the Federal Reserve.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke a string of four down-weeks and rose to 116.0 (from last weeks 115.0). In its dailies the index showed a pronnounced change early to mid-week, starting flat to the previous week but strengthening sharply as the week progressed and ended.

The paperboard-based Consumption Index added to the previous weeks surge (its 3rd up week in a row), rising to 135.7 (from last weeks 135.5), its highest level since March 10th. In its dailies the measure was red-hot at the very beginning of the week (on Saturday) but softened thereafter.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern of re-accelerating decline.

Last week appeared to be a good week for the economy, presumably as factories respond to increased consumer activity, accommodating it by increasing production scheduling. Last weeks fade in the consumption index is a concern and needs to push back up. On balance, the US economy looks to be underpinned by a thick cushion of excess of consumption over industrial production, and by recent gains in consumption. Deep divisions of optimism between the consumptive and productive ends of US society also remain evident in the disconnect between the gaining consumption index vs the declining production index, not to mention the ever-dwindling inventories measure.

It is very important that the Federal Reserve continue its newly-announced resumption of quantitative easing (it announced two weeks that it would resume quantitative easing... a move that, though very much late, was necessary to keep us out of depression). I have very deep concerns of the rationality of past Federal Reserve & Governmental monetary policies, and have deep concerns of the practicality of its monetary-measurement-systems. I see the US as a country pulled into a sewer of debt by continuing patterns of monetary outflows resulting in a situation where the US "Money Supply" is a gigantic short position (private sector plus public sector) covered by ridiculous methods of accounting (where dollar-assets are counted without deducting dollar-liabilities).

The future of the US economy remains with the consumer (as always), as US industrial production appears to remain very responsive to patterns in fluctuations of consumption. In its own way, this fact is a testament to the underlying (now-hidden) power of the US economic system. Many nations are constrained at the productive ends of their economies, not at the level of consumption. The US is abundant it wisdom and eagerness to produce. All that is needed is for its government to allow it to do so.


-Robry825

Sunday Night Economic Assessment

The US Industrial economy eased off again last week (if pipeline scheduling is correct) as industrial production slipped, while consumer spending surged on the heals of an announced resumption of quantitative easing (purchasing of treasury debt) by the Federal Reserve.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for its fourth straight week, declining to 115.0 (from last weeks 115.5), It's lowest level since May 5th. In its dailies the index started soft but ended the week with daily activity roughly in line with the prior week.

The paperboard-based Consumption Index surged robustly within the week (2nd up week in a row), soaring to 135.5 (from last weeks 128.0), its highest level since March 10th. In its dailies the measure started firm at the beginning of the week then built upon that momentum throughout the week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its pattern of re-accelerating decline.

On balance, the US economy looks to be underpinned by a thick cushion of excess of consumption over industrial production, and by recent gains in consumption. Deep divisions of optimism between the consumptive and productive ends of US society also remain evident in the disconnect between the gaining consumption index vs the declining production index, not to mention the ever-dwindling inventories measure.

If the implied surge in consumer spending can hold, it should argue for the resumption of US economic growth as factories respond to increased consumer activity, accommodating it by increased production scheduling.

The Federal Reserve announced last week that it would resume quantitative easing, a move that (though very much late) is necessary to keep us out of depression. I have very deep concerns of the rationality of past Federal Reserve & Governmental monetary policies, and have deep concerns of the practicality of its monetary-measurement-systems. I see the US as a country pulled into a sewer of debt by continuing patterns of monetary outflows resulting in a situation where the US "Money Supply" is a gigantic short position (private sector plus public sector) covered by ridiculous methods of accounting (we count dollar-assets without deducting dollar-liabilities).

If businesses were allowed to value themselves the same way the Feds count money supply, the big banks that failed the last couple of years, and GM and Chrysler, would have been shown to be worth a fortune... right before the days that they all went bankrupt! No wonder they never audit the Federal Reserve!


-Robry825

Sunday Night Economic Assessment

The US Industrial economy retreated again last week (if pipeline scheduling is correct) as industrial production backtracked, while consumer spending turned and worked higher.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for its third straight week, declining to 115.5 (from last weeks 116.8). In its dailies the index was soft throughout the week. Automotive-related flows re-weakened last week (strongly bucking seasonals), an indication that the automotive sector is out in front of the recent industrial weakness. Also weak are the Chemical/Fertilize/Steel and Cement groups. I am also suspicious that commercial real estate construction is getting killed this month, judging by divergences in steel, automotive, cement, brick, and asphault groups.

California, however, appears to be rebounding (perhaps thanks to a weakening dollar).

The paperboard-based Consumption Index bucked its 1-week downtrend and advanced to 128.0 (from last weeks 126.8), its highest level since May 22nd. In its dailies the measure started flat then firmed midweek...

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its pattern of re-accelerating decline.

On balance, the US economy looks to be underpinned (for the moment) by a cushion excess of consumption over industrial production, and by recent gains in consumption. Deep divisions of optimism between the consumptive and productive ends of US society also remain evident in the disconnect between the gaining consumption index vs the declining production index.

But what of that seemingly never-ending decline in the inventories measure? (We are now into the speculative part of this weeks post). Three theories come to mind... 1) the models could be in error, possibly under-estimating urban industrial declines and/or over-estimating rural paperboard advances... 2) the models are reflecting extreme business-owner pessimism, keeping businesses afraid to hire on the chance a hostile government hands their heads to them in the months and years ahead... or more frighteningly... 3) the models are reflecting attrition, as investors are too afraid to start new businesses (and therefore acquire startup inventories) even while tens of thousands of older businesses close (and liquidate inventories) due to retirement of owners or bankruptcy.

Of those three possibilities, the first is a real stretch (though the inventories measure is the weakest of the three statistically) given the sharpness, steadiness and persistence of its decline.

The remaining two would be supported by the resistance of the unemployment rate to go down in the stiff gains of the industrial production index, and gains in profitability of existing industry and businesses (more consumer dollars into less hands = higher margins.

The last (attrition) would be supported by the presently-climbing high mall vacancy rates and declining commercial real-estate values, as well as the indications of extreme weakness in commercial construction (as noted above).

All-in-all, number three (attrition) followed by number two (pessimism) are the more likely and reasonable, but on the weight of the evidences, attrition seems the best logical fit, and (assuming I am right) makes employment gains very likely if at all possible, and (given the declines of the production index) I suspect unemployment will start ti surprise and tick higher in coming weeks should these present trends not reverse quickly.

As noted previously, we had a very close call on the economy three weeks ago as consumption had fallen (at that time) very close to production, risking a crossing which would have opened the door to a disastrous resumption of recession. That door appears thankfully to have re-closed in the short-term, thanks to the recent slight gains in implied consumption, but that door (in this present environment) must not, at all costs, be allowed to reopen. I suspect if it does, we go immediately into depression, not recession.

Politically, the gas-flow near-debacle three weeks ago seemed very closely aligned (in the gas-flows) with a Republican attempt to block unemployment extension (scaring the heck out of consumers- employed and unemployed alike), causing consumers to momentarily cut back "just in case", risking a collapse that would certainly fed upon itself and been nearly unstoppable. If Republicans had succeeded, we likely would be collapsing into depression right now.

Not to worry, though, as the Democrats are firmly in control of this blunder-bus of a government that continues to drunkenly weave its way down the road. Perhaps we need a new Coffee Party to go along with our new Tea Party so we can rid ourselves of our old Chardonnay and Beer parties!



-Robry825

Sunday Night Economic Assessment

The US Industrial economy backtracked last week (if pipeline scheduling is correct) as industrial production declined, while consumer spending also eased off a bit.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its second straight week, dropping to 116.8 (from last weeks 117.8). In its dailies the index showed some resilience... firming last weekend and holding above prior-week levels through Friday. Automotive-related gas-flow scheduling also finally began to ramp up, reflecting a likely end to the July retooling period (exhibited in years past as a pronounced slow-down the first two weeks of July)..

The paperboard-based Consumption Index backed off a tad from its previous weeks surge, easing to 126.8 (from last weeks 126.7). In its dailies the measure started firm then flattened vs the prior week..

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its pattern of decline, though starting to re-accelerate in its decline.

As noted previously, we had a very close call on the economy a couple weeks back as consumption had fallen (at that time) very close to production, risking a crossing which would have opened the door to a possible resumption of recession. That door appears thankfully to have re-closed in the short-term, thanks to the recent slight gains in implied consumption.

That near miss, however, betrays the fragility of the economy, as the productive end of the US economy appears to remain entrenched in defensiveness (understandable given a government strongly-perceived by it as anti-business/investor government these days), while the consumptive segment of the US economy wavers in its perceptions and confidences in the maintenance of its perceived pro-consumer government.

On balance, the US economy looks to be underpinned (for the moment) by a cushion excess of consumption over industrial production. We will see how that cushion holds as we progress into the fall congressional elections.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy took a breather last week (if pipeline scheduling is correct) as industrial production declined, while consumer spending thankfully went the other way and surged higher.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke a string of three up-weeks in a row, falling to 117.8 (from last weeks 118.7). In its dailies the week was very week throughout, and appeared as if still in an extension of the July retooling period (which in years past has exhibited an end mid-month) as automotive natgas scheduling has yet to turn up. California, interestingly, had a very strong looking week.

The paperboard-based Consumption Index conversely surged to 126.7 (from last weeks 123.4). In its dailies the measure was firm throughout and especially into the weekend.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its pattern of decelerating decline.

As noted in last Sundays economic assessment, this past week was an important week as consumption (at that time) was falling very close to production, risking a crossing which would have opened the door to a possibility of resumption of recession. We needed very badly to see a turn in the Consumption Index (and we got it).

We also got another close call on the economy (by way of the threatened curtailment of extended unemployment benefits) which was narrowly avoided Thursday when a bill finally cleared a congressional log-jam and was signed into law by the President. The move to cut unemployment threatened to push consumer spending below production, setting off a chain reaction of reduced spending... leading to production cuts... leading to layoffs... leading to reduced income... leading to reduced spending... and on and on and on.

On balance, the US economy looks to be more firmly underpinned than last week as its cushion (the ongoing excess of consumption over industrial production) got pumped by this weeks surge in (gas-flow) implied consumer spending.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy inched ahead last week (if pipeline scheduling is correct) as industrial production advanced slightly, while consumer spending meandered higher.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for its third week in a row, advancing slightly to 118.7 (from last weeks 118.5). In its dailies the week was soft throughout, though not out of line with seasonal expectations (we are at the end of the traditional July retooling period).

The paperboard-based Consumption Index broke a string of three down-weeks in a row and decided to turn higher, gaining to 123.4 (from last weeks 122.8). In its dailies the measure started week but firmed late into the weekend.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its pattern of decelerating decline.

On balance, the economic advance (from the perspective of gas flows) looks to be meekly continuing, though its cushion (the ongoing excess of consumption over industrial production) remains thin and well off of the healthy look it had in previous months.

Next week is an important one for watching, as we should be getting a spurt Monday-on from the exit of the Seasonal retooling period. We really need for this to hit, and especially to hit consumer spending (to pump up the cushion between consumption and industrial production).



-Robry825

Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct) as industrial production pushed higher, while consumer spending shook off its Pre-July-4th spurt and continued to soften.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for the second week in a row, climbing to 118.5 (from last weeks 117.7). In its dailies the week started strong (especially given the July 4th holiday) but weakened as the week progressed into the seasonal July retooling period.

The paperboard-based Consumption Index slipped for its third week in a row, dropping to 122.8 (from last weeks 123.9). In its dailies the measure started very strong but quickly weakened as the week unfolded.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again declined, though the momentum within its decline continues to slow.

There are mixed signals behind July's strength... The weakness in implied consumer spending casts worry, yet the Food Sector (see "Part 8" post on the Investor Village CWEI Board) is bullishly continuing its decent from its April 2010 peak (The Food-Sector sampling has been a good contra-indicator throughout the recession... and is suggestive of continued improvements in consumer self-confidence).

On balance, the economic advance (from the perspective of gas flows) looks to be meekly continuing though its cushion (the ongoing excess of consumption over industrial production) is being eaten away.




-Robry825

Sunday Night Economic Assessment

Finally an up week for the US Industrial economy (if pipeline scheduling is correct), as industrial production turned and worked higher, while consumer spending (though declining for the week) showed signs of a rebound late.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of four down weeks and advanced to 117.7 (from last weeks 117.4). In its dailies the week started modestly then strengthened as the week progressed.

The paperboard-based Consumption Index dipped for its second week in a row, dropping to 123.9 (from last weeks 124.1). In its dailies the measure started soft but firmed throughout the week, and looked very strong in this weekends preliminary scheduling (should that scheduling hold).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) once again declined, though the momentum within its decline has definately slowed.

Last week was a very important week and was to be watched closely as it marked both the beginning of a new month and the beginning of a new quarter. Big changes within the gas flows tend to like to happen at such transitory points between months or quarters, as factories & retailers adjust to changing trends in orders and inventories in their scheduling of production and purchases for the upcoming new month or quarter.

Last week did not disappoint, as good things seemed to occur within the dailies of both the Consumption Index and Production Index. We will hope it is not some aberration related to the July 4th holiday weekend as the support underpinning the recovery (the indicated excess of consumption over production) has deteriorated sharply in recent weeks... threatening recovery.

With high levels of stress within the business & investing sector of US society (implied by the ongoing lag of production to consumption and the decline of the inventories measure) the burden of recovery continues to be laid fully (as always) on the consumer.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy continued its recent pace of slow back-tracking last week (if pipeline scheduling is correct), as both industrial production and consumer spending both eased again.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) eased for its fourth week in a row, slipping to 117.4 (from last weeks 117.8). In its dailies the week started firm but softened as the week progressed.

The paperboard-based Consumption Index also slipped, dropping to 123.9 (from last weeks 124.1). In its dailies the measure looked soft all week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to show signs of slowing the momentum of its long-term decline.

The economy still retains its appearance of being narrowly supported by consumer spending (with the deficit of the Production Index to the Consumption Index), though that support continues to be chipped away at the level of consumption. Stress within the investor/business sector of US society continues to be suggested in the ongoing lag of production to consumption and the decline of the inventories measure.

This upcoming week will be one to watch for changes as Tuesday marks both the beginning of a new month and the beginning of a new quarter. Gas flows tend to like to change around such days, as factories & retailers adjust to changing trends in orders and inventories in their scheduling of production and purchases for the upcomming new month or quarter.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy (after a very good month of May) appeared to continue its June softness (if pipeline scheduling is correct), as industrial production and consumer spending both backtracked.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) eased for its third week in a row, slipping to 117.8 (from last weeks 118.8). In its dailies the week started soft but firmed up as the week progressed.

The paperboard-based Consumption Index also slipped, dropping to 124.1 (from last weeks 127.5). In its dailies the measure looked soft all week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to show signs of slowing the momentum of its long-term decline.

The economy still retains its appearance of being supported by consumer spending (with the deficit of the Production Index to the Consumption Index), though that support continues to be chipped away at the level of consumption. Stress within the investor/business sector of US society continues to be suggested in the ongoing lag of production to consumption and the decline of the inventories measure.

I continue to worry that strong foreign demand for dollars right now that is draining money out of the US (not to mention the ongoing trade deficits draining money out of the US) is a grave risk to the US economy. I suspect the Federal Reserve would do very well with another round of quantitative easing (purchasing of treasury debt). US dollar looks too strong for the good of the US economy.

Absent that, should the markets not find a way to reverse the dollar, and consumption decides to undercut production, we could see a catch-22 style contraction (as we had last fall) should businesses choose not to let inventory build and start laying off instead... scaring consumers to spend less... scaring businesses to scale back and lay off... scaring consumers to spend less... scaring businesses to scale back and lay off... and on and on into a deflationary spiral.



-Robry825