The US Industrial economy advanced again last week (if pipeline scheduling is correct) and consumer spending eased ahead of congressional passage Sunday of a landmark (and highly controversial) Democratic health-care bill.The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) forged ahead for the fifth week in a row, rising to 113.7 from the prior weeks 113.0, and scored its second record high in as many weeks. In its dailies (as per the "Part 7" industrial daily posts on the IV-CWEI site) the week was stronger throughout vs the prior week.
For the third week in a row, the paperboard-based Consumption Index went the other way and dropped to 128.4 from the previous weeks 134.8. In its dailies the week was extremely soft, continuing to 24 days the pronounced midweek easing of four weeks ago.
The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to fall for the gazillianth week in a row.
Interesting enough, the dailies of the Consumption Index approached the dailies of the Production Index last week, suggesting at a neutralized economy that (at least for the time being) is at risk of stalling. The recent drop-off in the consumption index dailies is a big concern, should it not reverse soon (Though the consumption index is a very volatile index... mirroring the emotional volatility of the consumer). Also of concern is the continuing lag in the Production vs Consumption Index, which continues to imply a shallowness in the productive end of the US economy... which is a continuing drag on employment and job-creation.
As of tonight, we appear to have a health-care bill that will be making the news and echoing back and forth in the minds of both consumers and producers Monday. That bill is portrayed as pro-consumer by Democrats and anti-consumer by Republicans.
My own long-term view of the health-care bill is that it will (if it survives procedural challenges in congress and legal challenges in the courts) eventually prove to be a cash-flow transfer away from the consumer (health-insurance payer) to the investor/producer (doctors, lawyers, drug companies, etc) that will have to be accommodated somehow by either the Federal Reserve or further government stimulus... to prevent consumer-dollars from being diverted into health care (to cover 31+- million new US citizens) from elsewhere in the economy.
In the short-term however, the emotional-aspects of the health-care bill should outweigh its practical aspects (given this emotion-driven economy and emotional-driven markets). If consumers see it the Democrats way (pro-consumer) it might just give a quick boost to consumer confidence (and consumer spending). Of course if consumers see it the Republican way than the economy will be at risk, given the very recent softening implied by the gas-flows in consumer spending.
It will be real interesting to watch the gas-flows this week to see which way it actually goes.
-Robry825
