Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), amidst very weak consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for the seventh time in the last eight weeks to 123.9 (vs last weeks revised 123.3). It was the second weekly record-high in a row for the index. In its dailies (raw, non-seasonally adjusted flows) the first three days of the week were slightly soft, then strengthened sharply Wednesday through the weeks end.

The Consumption Index broke lower for the first time in four weeks, dropping to 143.7 (from last weeks 148.5). In its dailies the measure was very soft throughout the entire week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again continued in its long-term decline.

On a little brighter note...Food Group scheduling (see "Part 8" posts on the Investor Village site) is somewhat backing away from its late-April / early-May strength (The Food group has a contra-relationship with consumption, and gains to the measure historically have tended to coincide with weakness in consumer spending). Seasonally however the softness is minimal, and the May-2011 monthly average bearishly at record high levels.

In looking at the economic-implied turns of the past three weeks, it appears most likely an Osama-Bin-Lauden reaction... with the May-1st jump in consumption coinciding with the May-1st news announcement of the taking out of Bin Lauden... and lasting exactly ten days.

The economic recovery remains supported (for the moment) by increases to the consumption index, the lead of consumption over production (in the 28-day indexes), and continuing declines in the inventories measure.

Concern remains however, over the recent weakening in cunsomption-index dailies (the seasonally-adjusted dailies of the consumption index the past three days have been well below the production index).

Concern also remains on the upcoming end of the Fed's second round of quantitative easing (My preference would be to see to see at least a meek "QE-3"... perhaps 1/2 of QE-2), as well as the continuing threat of government saber-rattling leading to ineptitude within the present split government.

With unemployment hovering near 9%, should the Federal Reserve not announce a QE-3, and consumers react and take us back into recession, that 9% unemployment could become 13% to 14% very quickly.

With foreign-trade-imbalances draining the US portion of the US money supply (we give our money to them for their goods, then the US government borrows it back and deficit-spends... to replentish the US citizens portion of the US money supply) we are stuck in a quagmire... with Trade-deficits, government-deficit-spending, and increasing-national-debt hardwired into the economy.

Simply put (as I see it) unless there is some break in fundamentals (Strong-dollar leading to trade-deficit leading to government-borrowing & deficit-spending leading to further trade-deficits) the present political status quoe of increased government debt and rampent deficit-spending is unreversible... no matter what the politicians do... as economic-softness will force their hand (either deficit-spend, or go into recession once the consumer is again out of cash).



-Robry825

Sunday Night Economic Assessment

The US Industrial economy forged ahead again last week (if pipeline scheduling is correct), while consumer spending vacillated .

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for the sixth time in the last seven weeks, to 123.4 (vs last weeks 122.6), breaking its previous February high of 123.0. In its dailies (raw, non-seasonally adjusted flows) the week started strongly but softened slightly vs the prior weeks strong ending.

The Consumption Index also gained a lot of ground last week (second up-week in a row), climbing to 148.5 (from last weeks revised 142.3). In its dailies the measure was strong through midweek, then trended down sharply into the weekend.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again continued in its long-term decline.

Food Group scheduling (see "Part 8" posts on the Investor Village site) echoed the late-week softness in the consumption index... bearishly restrengthening throughout the week. The Food group has a contra-relationship with consumption, and gains to the measure historically have tended to coincide with weakness in consumer spending.

In looking at the economic-implied turns of the past couple weeks, it is starting to look like the sharp upward turn may prove to be something more on the brief, temporary side. The Food-Group continues to scream pessimism... pushing upwards again to levels not seen since the bottom of the recession, while the volatility the past couple of weeks in the consumption index dailies is suggestive of uncertainty and uneasiness on the part of consumers.

I have not checked the time line, but I wonder if all this coincides with the US's takeout of Osama Bin Laden. An emotional reaction to current events.

Concern remains on the upcoming end of the Fed's second round of quantitative easing (My preference would be to see to see at least a meek "QE-3"... perhaps 1/2 of QE-2), as well as the continuing threat of government saber-rattling leading to ineptitude within the present split government.



-Robry825

Sunday Night Economic Assessment

A dramatic swing in the gas-flows last week, as a first-of-the-month surge in the consumption index Sunday lead to sharp-strengthening in the industrial index three days later.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for the fifth time in the last six weeks, to 122.6 (vs last weeks 122.1) (highest was 123.0). In its dailies (raw, non-seasonally adjusted flows) the week started flat through midweek, then strengthened Wednesday-on.

The Consumption Index pushed ahead sharply last week (first up-week in seven weeks), climbing to 142.3 (from last weeks revised 134.5). In its dailies the measure surged Sunday and was strong the week throughout.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again continued in its long-term decline.

We very much needed to see a turn in consumption following the slowing implied within the gas-flows and the listlessness of the Easter-Holiday break, and we appeared to get it last week. The short-term dip in the economy (evidenced by last weeks reported bump in the unemployment numbers) was very much threatening to snowball as the raw dailies on the consumption index were threatening the dailies on the production index... leading into a period of traditional seasonal softness.

Food Group scheduling (see "Part 8" posts on the Investor Village site) also joined the first-of-the month party... backing off of its bearish strength starting the same day as the consumption index took off.

On the turn, the economy (for the moment) appears well-supported by the surge in the consumption index, continuing gains in the production index, a widening gap/lead of the production index, and continuing declines in the inventories measure.

Concern remains on the upcoming end of the Fed's second round of quantitative easing (My preference would be to see to see at least a meek "QE-3"... perhaps 1/2 of QE-2), as well as the continuing threat of government saber-rattling leading to ineptitude within the present split government.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy moved forward again last week (if pipeline scheduling is correct), while consumer spending was flat with the Easter holiday week.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for the fourth time in the last five weeks, to 122.1 (vs last weeks revised 121.8, and within a point of its all-time high of 123.0). In its dailies (raw, non-seasonally adjusted flows) the week was boringly flat throughout, though it benefitted in the 28-day model on seasonals.

The Consumption Index held steady in the latest week (breaking its string of 5 down-weeks in a row), at 134.5 (same as last weeks 134.5). In its dailies the week was very soft, though in line with the Easter-Holiday seasonals.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again continued in its long-term decline.

Food Group scheduling (see "Part 8" posts on the Investor Village site) is of great concern and made further gains last week. The measure has been ominously strengthening as of late, rising to near levels not seen since the January/February 2009 recessionary-bottom. Such activity is strongly indicative of deep consumer mistrust in the economy (probably the reason for that 5-week decline in the consumption index). The Food group has a contra-relationship with consumption, and gains to the measure historically have tended to coincide with weakness in consumer spending.

The state of the recovery for the moment is very uncertain... almost akin to a gas leak in the basement that has yet to ignite (where you hope you can get the gas shut off and basement aired out before something produces a spark). Hopefully one of those sparks won't be the saber-rattling between Democrats and Republicans regarding budgeting and threatened government default, or the forthcoming end of QE2 (second round of quantitative easing).

(My preference would be to see to see at least a meek "QE-3"... perhaps 1/2 of QE-2 (though it will continue to pressure the dollar)... and to see the White House take default off the table by executive order.)

But for the moment... the recovery continues to appear supported by the lead in the Consumption Index over the Production Index, and continuing declines in the Inventories measure... assuming no sparks! Once past the Easter holiday we are really going to need to see consumer spending reaffirm itself to keep fundamentals in place.



-Robry825