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
