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
