Sunday Night Economic Assessment

The US Industrial economy continued to advance last week (if pipeline scheduling is correct), closing in a bit more on consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) racked up its fourth record high in as many weeks, rising to 120.2 from the prior weeks 119.2. In its dailies the week started firm but faded (as per seasonal expectations) early on in approach to the Memorial-Day holiday weekend. The Month of May continues to look especially impressive with its surge given that May tends to be the weakest month of the year.

The paperboard-based Consumption Index however bucked the trend (breaking a string of five up weeks in a row), falling to 127.1 (from the previous weeks 131.7).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its long-term decline, though the decline looks to be slowing in momentum the past few weeks.

For the time being, the economy appears to remain supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the continuing decline of the Inventories Measure continuing to affirm the economic recovery.

However, with the Production Index now starting to get closer to the Consumption Index, we are approaching a point where the impetus of the expansion (week as it is employment-wise) could get challenged. While we are not there quite yet (the indexes would have to cross) we could loose momentum quickly if they do cross and double-dip, given the shallowness of the recovery at the investment/business end of the economy.

Now this is speculative on my part... but from looking at the flows, the strength of the US dollar, and the news from Europe... I get a sense that there is 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)... and wonder if another round of strong quantitative easing by the FED is in order.



ROBRY VACATION NOTE... There will likely be no Sunday night post next weekend as my family and I are headed off on vacation for a week (anticipate returning on Monday, June 7th. Depending on how well the computer automation performs, I hope to do a midweek economic post probably Tuesday or Wednesday night.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), chasing strengthening consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) racked up its third record high in as many weeks, rising to 119.2 from the prior weeks 117.3. In its dailies the week appeared robust from start to finish. Mays surge continues to look especially good given that May tends to be the weakest month of the year.

The paperboard-based Consumption Index also continued higher (its fifth up-week in a row), rising to 131.7 (from the previous weeks 129.6).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its long-term decline, though the decline looks to be slowing in momentum the past few weeks.

It is strange watching the disconnect the past few weeks between the economically-indicative gas flows vs the markets, with the sharp contrast between the implied surge in the economy vs the pessimism in the markets. One has to wonder if the markets are reflecting April gas-flow weaknesses (as being recognized now?), reflecting European concerns (bear trap to set up a summer rally?), or perhaps looking ahead to discount fall mid-term elections (discounting the loss of unilateral Democratic rule as a depressant to Democratic consumers?) or other troubles.

For the time being, the economy appears to remain well supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the continuing decline of the Inventories Measure continuing to affirm the economic recovery.

However, it still appears to continue as a jobless-recovery, as the lag in the Production Index (vs the Consumption Index) and the softness in the Inventories Measure continues to imply a shallowness in the productive end of the US economy... which suggests a continuing defensiveness in industry toward aggressively hiring to chase market share or pursue new ventures.



-Robry825

Sunday Night Economic Assessment

Forget all the gloom in the markets these past few days, the US economy is surging! (according to pipeline scheduling) as Industrial production continues to chase consumer spending higher.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) achieved its second record high in as many weeks (rising to 117.3 from the prior weeks record 115.4). In its dailies the week started moderately (in weekend scheduling) but firmed as the week progressed. The week looked especially good against seasonals as May tends to be the weakest month of the year.

The paperboard-based Consumption Index also worked higher (its fourth up-week in a row), rising to 129.6 (from the previous weeks 128.3).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its long-term decline, though the decline looks to be slowing in momentum the past few weeks.

It has been a fascinating flip from implied April-weakness to May-strength, both in terms of industrial production and consumption, and the flip is very noticeable in the "Part 8" sector breakdowns (on the Investor-Village CWEI Board). For instance the Metals/Steel groups were pressured in April but strong in May (Aluminum is surging this month so far).

The Food Group is also very suggestive on this... April was the highest (52.5 mmcf/day) in fourteen months (Food is a contra indicator... tends to rise when consumers are stressed), while May is looking much better at a lower 47.5 mmcf/day.

Why the April-May Flip? I haven't a clue! Would greatly appreciate anyone else's views as to possible reasons but I am in the dark in my thinking as to possible catalysts.

Overall, the economy appears to remain well supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the continuing decline of the Inventories Measure continuing to affirm the economic recovery.

However, it still appears to continue as a jobless-recovery, as the lag in the Production Index (vs the Consumption Index) and the softness in the Inventories Measure continues to imply a shallowness in the productive end of the US economy... which suggests a continuing defensiveness in industry toward aggressively hiring to chase market share or pursue new ventures.




-Robry825

Sunday Night Economic Assessment

The US Industrial economy turned and advanced sharply last week (if pipeline scheduling is correct), while consumer spending gained.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) after four straight weeks of decline surged to a record high of 115.4 (from the prior weeks 113.8). In its dailies the week was firm throughout. The week held up especially well against seasonals, where May tends to be the weakest month of the year.

The paperboard-based Consumption Index also gained (for its third week in a row), rising to 128.3 (from the previous weeks 127.9).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its seemingly never-ending decline.

The economy (at least for now) appears to remain supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the deep and continuing decline of the Inventories Measure continuing to affirm the economic recovery.

A lingering 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.




-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 held its ground.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) worked lower for the fourth straight week, settling at 113.8 (from the prior weeks 114.1). In its dailies the week started strong early then moderated back to the trend of the last few weeks.

The paperboard-based Consumption Index gained for its second week in a row, rising to 127.9 (from the previous weeks 125.6), In its dailies the week was choppy to soft.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its seemingly never-ending descent.

In spite of the softness of the past four weeks, the economy (at least for now) appears to remain supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the deep and continuing decline of the Inventories Measure continuing to affirm the economic recovery.

A lingering 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.




-Robry825