The US Industrial economy pushed ahead sharply last week (if pipeline scheduling is correct), while brisk consumer spending moderated just a tiny bit.
The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) finally took out its old 2007 highs... rising from 109.1 (last week) to this weeks all-time-high of 110.9 (the 2007 record was 110.2, the bottom was 86.7 on May 28th 2009).
In its dailies (as per the "Part 7" industrial daily posts on the IV-CWEI site) the week reflected the traditional New-Years holiday softness early, then industrial scheduling took off from mid-week on.
The Paperboard-based Consumption Index lost a little ground last week (following four consecutive weekly advances), remaining somewhat shy of its 2009 peak but still at levels way out ahead of industrial production.
The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its seemingly never-ending drop, remaining well-below pre-recessionary levels.
Of great encouragement... steel-sector gas-flows (which have been front and center in the recovery) continued to edge higher (seasonal expectations would be to edge lower - we are in the traditional Early-January retooling period), and some of the economies poorest performers (such as the Auto and Lumber groups) have also been doing quite well.
The maintained strength in consumer spending, the deficit of the Production Index to the Consumption Index, the deep and continuing decline of the Inventories Measure... all remain supportive of the present fourth leg up for the economy, though the continuing lag in the Production vs Consumption Index continues to hint to a shallowness in the productive end of the US economy... which is a continuing drag on employment and job-creation.
(As the Production Index has now taken out the 2007 highs, it can no longer be assumed that the recession is the cause of the present unemployment problem. Industrial gas-flows suggest the recession is completely gone. Yet 10% unemployment remains.)
Key to the US economy in the short term will continue to be the consumer... if consumer spending stalls, the productive side of the economy likely will follow into decline (Consumer-spending has been the leash that leads the dog of industrial production); if consumer spending continues strong, likely so will industrial production.
Of concern in the intermediate term will be the possibility of modest inflationary pressures as industrial production pushes further above the old 2007 highs (in terms of the Production Index) and the strongest sectors of the US industrial economy push towards 100% capacity utilization.