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