Monday Morning Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), as consumption somewhat backed away from its recent strength.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) climbed for the sixth time in the last seven weeks, rising to 121.0 (vs last weeks 120.1), its highest reading since June 29th. In its raw dailies (above), the measure was very strong early through Wednesday before trailing off for the Thanksgiving holiday weekend.

The Consumption Index backed off from its highs of the prior week, dipping to 137 (from last weeks revised 140.1). In its dailies the measure started the week soft but firmed over the Thanksgiving holiday period.

"Black Friday" sales, though talked up in the press (vs year ago numbers) appeared lackluster in the gas-flows... beating last-years "micro-recession" numbers only barely but failing to beat 2-week-ago numbers. (Note the year-ago downward-plunge above in that green consumption line... last years "Black Friday" sales were horrid.)

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

For the time being, the economy continues to appear supported by firmness in industrial (factory) natgas-scheduling, and the recently-widened gap between the production and consumption indexes.

Of concern is last weeks softness in the consumption index, and a somewhat bearish restrengthening of food-group scheduling (indicative of declining consumer confidence). Federal Reserve policy still appears hawkish (allowing liquidity to drain from the US), theoretically capping economic expansion and questioning the sustainability of the recent economic advance.

Corporate profitability continues to look to be solid (so far) for the 4th quarter, and given the caution in the business sector, should surprise on the upside for many quarters to come... as long as business-caution persists.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy gained further ground last week (if pipeline scheduling is correct), as the consumption index gained as well.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) retook most of what it lost the prior week , rising to 120.1 (vs last weeks 119.9). In its raw dailies (above), the measure was very strong throughout the week.

The Consumption Index also put in a gain (for its second week in a row), advancing to to 140.6 (from last weeks 139.6). In its dailies the measure started the week firm but softened sharply Wednesday on.

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

For the time being, the economy appears well-supported by the recent firmness in consumption, and it appears industry is still somewhat behind in catching up to the recent up-tick in consumption.

Corporate profitability looks to be solid so far for the 4th quarter, and the corporate-caution that is well-evidenced in the gas flows would suggest corporate profits are probably well-protected from economic softness that will likely (unless the Federal Reserve reverses its course) once past Christmas.

On the consumption side, the Federal Reserve still appears hawkish (allowing liquidity to drain from the US), and until that changes... the lid remains on the consumer and on the economy.

The OWS movement is right in that something out there is trying to crush the "little guy", they are just clueless as to who (or what) it is. Unfortunately, so are the vast majority of other folks as well.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) technically took a break last week, while consumer spending came back to life.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for the first time in five weeks, dipping to 119.9 (vs last weeks 120.3). In its raw dailies (above), the measure started the week flat but strengthened sharply mid-week. The dip in the "Official" 28-day average was entirely due to a stronger week dropping off of the back-end of its four-week moving average, and in its dailies it was clearly stronger than the prior week.

The Consumption Index, conversely, reversed its two-week slump and advanced, gaining to 139.6 (from last weeks 136.6). In its dailies the week was very firm throughout.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), continues to re-accelerate downwards.

The weeks numbers (in spite of that "technical" weakness actually looked quite good, as the re-ignition in consumption (late in the prior week) looked to reignite production Monday Morning on.



---Position on Trade---

I was challenged over the weekend on trade. Specifically, whether I am suggesting (by my mention of the linkage with the economy with the trade deficit) I was suggesting the US go "protectionist". Quite the contrary... I believe strongly in a free-trade concept globally, and I believe it would be reprehensible and disastrous to close off free-trade.

Ending free trade would effectively cut out $600 billion plus (per year) of goods from US consumers (lowering the standard of living in an instant), and unleash instantaneous waves of inflation in the US (as the laws of supply and demand forced prices higher to cope with that $600-billion cut). (Ending free trade would plunge many parts of the world into depression as well, as the loss of US demand would chill all of the worlds export-economies... and absolutely crush economies such as China and India who have not yet found the capability to balance off their own economies without the presence of the US-Jumper-Cables).

Further, from a Christian standpoint (trying very hard to keep the "religious" stuff out of the posts but can not on this point) I believe the US has been very much been blessed by God, and (as the old scriptural adage goes)... "To whom much is given, much is required"... Meaning I believe there is an "expectation" of us all not to get to "greedy" and "self-centered". The US has been a blessing to many in the world (by way of opening its borders to both trade and employment to others), and I would not like to see that stop.

Yes, free trade can lead to "exploitation" of workers in other countries. But will shutting down free trade elevate those under-$2-an-hour labor rates to $10-an-hour plus? Or will it push folks out of those $2-an-hour industrial jobs and into 25-cent-an-hour agricultural jobs?

(That is not to say we should "give-away-the-store" either. Rather, we should begin to set aside emotion and pursue logic and reason in both politics and economics) (Yes, I said it, I see more "Emotion" than "Logic" and "Reason" in both... with only forms of contrived "Logic" and "Reason" thrown in to justify "Emotion" in present day US politics and economics)

Maybe I am just too pragmatic, but I see better ways of doing things.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) added a little more ground last week, as consumer spending looked to not know which way to go.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its fourth up-week in a row, rising to 120.3 (vs last weeks 119.7). In its raw dailies (above), the measure was mostly flat and in line with the previous weeks numbers.

The Consumption Index, conversely, had its second down-week in a row, dropping to 136.6 (from last weeks 137.5). In its raw dailies the measure started soft to the previous week but firmed late over the weekend.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), continues to re-accelerate downwards.

Internally, food-group scheduling and steel-manufacturing scheduling continues a slightly-improved look in spite of the recent stall in the consumption dailies. Still, stress remains evident in the underlying numbers, and the economy reminds one of a rock balancing on top of a fence on a windy day... where you just can't tell when and on which side it is going to fall off.

The numbers remain bullish to strong corporate profits regardless, and the fourth quarter (aside from the battered steel group) looks to be solid. Given the bearishness in the investment/business end of the US economic spectrum, that profitability appears well-protected.

The Federal Reserve (as expected) announced nothing again in its stage-appearance last week, and appears "out-of-the-game" (or maybe "out-to-lunch") permanently... leaving the support of the US economy solely to governmental deficit spending.

The question is... when does the next US-Government debt downgrade come... and what will be the result? In corporate bankruptcies, there is usually an unstoppable downward spiral where downgrades increase debt-service costs, which in turn weaken a companies cash-flows... generating further downgrades... making bankruptcy unavoidable.

At some point (unless the government gets its act together quickly) that happens to the US government as well. The only question is when.

When that happens, the massive imports into the US stop (and maybe reverse), striking the US standard of living, emptying store shelves, creating shortages, price-increase spirals, inflation, and inevitably political upheaval.

There is probably some time still left, and a chance to turn things around, but that time is getting very short.

A long time ago (late 1990's) when I first started posting, I remember posting a call on the old Yahoo boards for Oil to go above and hold above $25, and was derided by others who thought it unlikely. That was an easy call, predicated on an imminent end to north-sea production increases which had previously contained oil pricing. This likewise is an easy call.

It is a shame, when, for two centuries citizens have risked their lives and reputations to defend the US from without, that it would be allowed to rot from within.



-Robry825