Monday, December 27, 2010

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

Monday, December 20, 2010

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

Monday, December 13, 2010

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

Monday, December 6, 2010

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