Sunday Night Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) gave more ground last week, as both the Production Index and Consumption index retreated.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its seventh week in a row, dropping to 119.5 (vs last weeks 120.2), and is at its lowest point now since 12/11/10. In its dailies, the measure was soft throughout the entire week, especially against seasonals.

The Consumption Index declined for its second week in a row, dropping to 143.4 (from last weeks 145.2). In its dailies the measure was firm most of the week, though it too was soft against seasonals.

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

As was noted last week, the Production Index still looks as if it is wanting to lead into recession, with higher corporate profit margins and higher unemployment numbers both implied. This pattern is not typical of the historical modeling (2004-date). Food-group deliveries (now at bearishly high levels) suggest high anxiety amongst consumers in the economy in general, and the whole of the US economy appears very vulnerable to the downside should any negativity spook consumers.

And with political interests holding out the possibility of a governmental-default "Econo-geddon" in their posturing over debt/spending limits, opportunity abounds for negativity to suddenly start to snowball.

I personally find it very troubling that government-debt obligations have not been taken off the table (by the executive branch) by executive order to the Department of Treasury . It would be a small thing to do, as the entity is under the President who has the authority to guide on exactly what is subject to default, and holding the door open to default on US debt obligations for purposes of political posturing has to be the height of political foolishness.

I worry... US corporations under US law that miss debt payments can be forced into taken into bankruptcy. Could the US Federal Government be forced to go "Debtor-In-Possession"? US courts are open to all, and there is that little thing called the "Equal Protection Clause". The US supreme court could surprise if a default lands on their steps. I would not take that chance!

I saw posted elsewhere a suggestion that the public should elect less lawyers and more accountants to congress. Perhaps not such a bad idea...



-Robry825

Sunday Night Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) lost a little more ground last week, with small losses in both the Production and Consumption indexes.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its sixth week in a row, dropping to 120.2 (vs last weeks 120.9). In its dailies, the measure was soft throughout the entire week.

The Consumption Index also declined, dropping to 145.2 (from last weeks 146.0). In its dailies the measure both started and ended flat, with a two-day weak spot in the middle Tuesday and Wednesday.

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

Overall, US natural gas flows are a tale of two economies, with the "Consumer Economy" (Consumer-spending) holding flat and the "Business Economy" (Industrial & Investment) slowly receding. It is a recipe (if it continues) for both soaring unemployment and soaring corporate profits... and eventually soaring prices and inflation should it continue and become entrenched.

In short, since February, the business & investment side of the US economy took the initiative over the whole of the US economy starting in February, and has begun to lead the economy ever since.

Will it continue and for how long? Is it an aberration? I do not know. But the emerging reality (in the gas-flows) is non-typical and rare historically, and will be interesting to see if it continues.

The bottom of the previous industrial recession (05/29/09) was preceded by a bottom in consumption months earlier (12/28/08), with consumption leading the economy out of recession. The industrial side of the US economy had its run June-2009 through May-2010, well behind the consumer-side, which had its run January-2009 through October-2009.

Prior to that, within the 2008 slide that started the recession, consumption lead the slide (09/08/08 high vs 12/28/08 low) over the business side (09/23/08 high vs 05/29/09 low).

In fact, throughout the life of the gas-flow-economic models (2004-2011) it has been typical for the production model to follow the consumption model, exposing corporate profitability to the whim of the consumer, with corporate profits both soaring and diving in response to changes in consumer-spending.

Has there been a grand change in the scheme of things? Is there some very long-term super-cycle in initiative that is in the process of flipping from the consumer to business? I am taken aback by all this, and it has not (until now) been in the gas-flows, but I have to start thinking of the possibility of it now as it is (at least for now) emerging within the gas flows.

There is probably some political-coloring within all this... There was quite a bump in raw Industrial gas-flow scheduling around the time of last falls November-Elections... presumably in response to the Republican landslide (Republicans being seen as the representative of business and investment).

So has the drop-off on the business end (since Feb-2011) been due to a fall-off of that election-optimism... or has something else changed, with businesses "wising up" to the new (and emerging) political and economic realities (that the consumer may be missing)... to take the initiative within the US economy.

It is one more frightening aspect for US consumers (and the "little-guy"), as we march off toward that potential "Econo-geddon" in a couple more weeks.



-Robry825



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Improvements include speed-optimizations throughout (complex spreadsheets should be significantly faster than the previous Robry-Calc... with my own gas-flow worksheets testing at 200% to 700% faster within the new spreadsheet)

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Sunday Night Economic Assessment

Another lackluster week for the US Industrial economy last week (if pipeline scheduling is correct), while consumption held its ground and the US took a break over its traditional July-4th holiday period.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its fifth week in a row, dropping to 120.9 (vs last weeks 121.5). In its dailies, the measure was soft early (over the July-4th holiday period), firmed up a bit midweek, then softened again into the weekend.

The Consumption Index went the other way with a small gain, edging up to 146.0 (from last weeks 144.8). In its dailies the measure was soft throughout the week, with only a brief one-day firming on Thursday.

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

Seasonally, the first couple weeks of July are historically soft (within the gas flows), presumably due to industrial retooling (especially in the automotive groups... which are themselves a significant part of the US industrial economy. We move out of the retooling period shortly, so we will be looking for signs of redirection (for better or for worse) the next couple weeks.

All the world seems to be waiting for the signal(s) the US government sends in the next couple weeks... with threatened government default only about three weeks away. Whether the signal is to advance the economy or kill it will depend solely on two negotiators at the table, but the markets, US consumers, US businesses, US investors, and a wide array of foreign interests will all be watching.

Best move (in my opinion) would be the a very slanted 90%-spending-cut / 10%-loophole-tax-increase... but only if combined with a very aggressive QE3 (too late for the half-strength QE3 I had thought of earlier).

(The Federal Reserve should definitely be at the bargaining table too... if not in the woodshed.)




-Robry825

Tuesday Morning Economic Assessment

The anemia in the US Industrial economy continued last week (if pipeline scheduling is correct), with consumption joining with production to head lower.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its fourth decline in as many weeks, dropping to 121.5 (vs last weeks 122.5). The Consumption Index broke its short 2-week-gain-stint, dropping to144.8 (from last weeks 145.7). The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again continued in its long-term decline.

Very poor quality within the July-4th-weekend gas flows makes gaging the start-of-the-month (July) changes difficult for the moment, though the back side of June retains the stagnant, dead-in-the-water look of the past several weeks

Steel-group scheduling showed a little life, with the June average inching up to .156 (from last weeks .154 and May's .153), though still well off of the May '10 recovery high (.206). Food-group scheduling continued its bearish ascent, with the June average gaining to .0498 (from .0489 last week), hovering at record heights for the measure.

Interestingly, Asphalt-plant scheduling has been torrid the last couple months, even as the economy stalled. Contrasting the strength in asphalt-plant imputs the last six months vs the topping out in the economy, the long-term assumption that construction/roadbuilding is stimulative to the economy appears flawed at best, and possibly totally wrong as it may actually (in fact) be a drain on consumption by drawing liquidity away from programs aimed toward lower-wage-earners (consumption-side) and redirect it towards higher-wage-earners (savings/industrial-production-side).

(High-wage union employment, like any other high-wage employment, should probably be considered more investment/savings-oriented than consumption-oriented... as higher-lifestyles have a better chance of generating a buffer of savings... to absorb changes in earnings... as opposed to lower-earnings-lifestyles where earnings-changes carry down to consumption.).

We continue to wait upon the governments response (or lack thereof) to the continuing budgeting/default issue, a quagmire that poses great risk to the economy even if it appears well-founded (which it may eventually not be at all).

My take on the signals coming from government is not good at all, and I fear the parties are bogged down in a choice between a bad deal (to satisfy political interests) or no deal at all. Problem is... cutting spending (to retirees/lower wage-earners) undermines consumption, and cutting spending to upper wage-earners (and raising taxes on the wealthy) undermines capital formation & investment.

Even cutting benefits to welfare cheats, and going after tax-dodgers, lowers their impact on the economy! (Though we all agree it should be done.)

And raising Taxes on investors and business... the last 12 months the foreign-trade deficit ran more than $522 Billion (approx $1,700 per person if you believe census estimates, or $6,800 for a family of four). That equates to $6,800 of US consumption (for that family of four) that goes away should that imbalance end, or $13,600 if it reverses. Per year! Eventually that imbalance will go away... one way or another... and unless investment is allowed to expand the US industrial base, that $6,800 (or $13,600) comes right out of the US standard of living.




-Robry825