Monday, July 16, 2012

Monday Morning Economic Assessment

Within the fog of the traditional first-two-weeks-of-July retooling period, the US Industrial economy again appeared to edge lower (if pipeline scheduling is correct) as both industrial-production and consumption declined.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its second down-week in a row, dipping to 123.6 (from last weeks 124.6). In its raw dailies (above) the week started soft early then firmed late vs the prior weeks trends.

The Consumption Index likewise turned lower (breaking its 3-in-a-row string of gains), retreating to 153.5 (from last weeks revised 154.4). In its dailies the measure started soft but firmed as the week progressed.

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

Overall (with the retooling and the quarterly-changeover) it is difficult to gauge the economy again this week. Next week the fog is gone so we should get a better picture.



-Robry825

Monday, July 9, 2012

Monday Morning Economic Assessment

The US Industrial economy backtracked last week (if pipeline scheduling is correct) while consumption edged forward, as the US entered its traditional first-two-weeks-of-July retooling period.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its 3-week string of gains, dropping to 124.6 (from last weeks 125.5). In its raw dailies (above) the week was soft throughout, maintaining the ratchet lower on the prior-weeks US Supreme Court healthcare decision.

The Consumption Index conversely gained (its third consecutive up-week in a row), rising to 154.7 (from last weeks 152.4). In its dailies the measure softened sharply from the prior week.

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

But overall (with the retooling and the quarterly-changeover) it is difficult to gauge the economy this week (just two-much statistical noise that is impossible for the models to resolve) and even the seasonal-adjustments are questionable (given the change in dynamics between recent years and the models history).

For the moment, the economy is hard to judge, and will continue so until we emerge from the retooling period starting at the beginning of next week.




-Robry825

Monday, July 2, 2012

Monday Morning Economic Assessment

The US Industrial economy pushed further ahead last week (if pipeline scheduling is correct)... as both production and consumption advanced in front of the traditional first-two-weeks-of-July retooling period, and the US-Supreme Court sided towards government (and consumers) in its landmark Thursday health-care decision.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its third straight up-week in a row, gaining to 125.5 (from last weeks 125.1). In its raw dailies (above) the week was generally soft, especially Tuesday on. There was little change to the surrounding Thursdays court decision.

The Consumption Index also rose (for its second week in a row), gaining to 152.4 (from last weeks 146.6). In its dailies the measure was strong most of the week, with a pronounced uptick starting Friday (after the Supreme Court ruling).

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

Overall, internals have turned supportive, with food-group scheduling bullishly backing off of its highs before the turn in consumption while the extremely-defensive industrial sector continues to tread well behind the reviving consumer sector.




-Robry825

Monday, June 18, 2012

Monday Morning Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), while consumption turned and went positive for the first time in weeks.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) put in its second up-week in a row, gaining to 124.7 (from last weeks revised 124.1). In its raw dailies (above) the week started slightly soft, then strengthened steadily as the week progressed.

The Consumption Index broke its five-week loosing spell, rising to 141.7 (from last weeks 141.3). In its dailies the measure was strong most of the week then softened into the weekend. Against seasonals (which argue for slowing) the week did very well overall.

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

All-told, (for the first time in months), internals are supportive, with food-group scheduling backing bullishly backing off of its highs before the turn in consumption while the extremely-defensive industrial sector continues to tread well behind the reviving consumer sector.


These "Economic Assessment" posts, started about four years ago in the midst of the "great recession", have run for quite a while since their introduction. But its been quite a while since I have written on the methodology behind them. Feeling that it has been too long since discussing the foundations of these posts (and my own investment strategies and philosophies) I started an explanational series with last weeks post, and this week will get into my own theories on the US economic cycle.

When I started investing (in the late 70's... when president Carter was president and hired Paul Volker, who was to reshape Federal-Reserve policy into what it was today) the economy was a morass of stagflation, with interest rates, unemployment, and inflation all exceeding 10%. At that time I tried to learn the principles behind monetarism, and held to them until well past the turn of the century.

Monetarism seemed to make a lot of sense... treating money as a commodity, and regulating its supply to counter demand (theoretically to control inflation) made sense. When you look at any raw commodity, when under-produced its price spikes and when overproduced its price crashes. It made perfect sense to think of money as any other commodity. Limit its supply and its "price" (inflation) goes the way you want it to. Cap the money supply, and you cap inflation.

However, as time went on, strange things began to happen. Debt of all kinds skyrocketed. Interest rates plummeted. The economy, which once (under Keynesian theory) was stimulated by a drop of the prime rate to 10%, or stimulated by small amounts of deficit-spending, in time became like a disease drug-resistant patient, to the point where today, even <1% interest rates and trillion-dollar-US-deficits can't seem to stimulate it.

Then, as I developed my present modeling and started to study patterns both within my own modeling doubts grew about monetarism. My own views simply did not work. And (like any trader that has to change his or her belief system and strategies to keep from getting crushed by the markets) I had to alter my theories. Today, my economic perceptions, while working quite nicely to time and profit from changes in economic trends, are quite radical, and I am very much the "outlier" today in my thinking.

My first "revelation" (forced change in thought) was to foreign trade imports. Conventional wisdom was that the enormous us trade-deficit is caused by US consumer-demand for foreign goods, benefited by substandard foreign-wage systems, that undercut US industrial competitiveness. However, I could not completely wrap my mind around that thinking. If such imbalances did exist, than why would not free-market systems (such as currency-exchange rates) correct for it. And what about foreign "dumping"? Why would a foreign corporation want to sell below cost (take a loss) to sell to the US. Loosing money is not the way that businesses prosper.

Then in my own studies, there was an issue of timing. Why, when foreign trade statistics or exchange rates changed, did not the gas flows not change likewise in a rational manor? And why did changes to foreign statistics lead changes to industrial gas-flows (if US consumer-demand was to blame for the foreign trade deficit) and not vice-versa?

Then it occurred to me... like in the commodities markets (where escalation in price can be caused by EITHER a rise in demand OR a drop in supply), foreign trade-deficits could likewise be triggered by either the buy-side (demand for foreign goods) or the sell-side (demand for US cash).

Suddenly, foreign dumping made sense. It was not US demand for foreign goods, but foreign demand for US dollars. It was foreign interests that wanted US dollars so much that they were willing to take a loss to get those dollars. The loss on dumping was the "commission" on the trade that they were willing to make.

And then there is monetarism... which (in its theory) wants to hold the actual count of dollars created (or printed) to a fixed amount. If the US money supply stays fixed, and demand for it grows, you have an imbalance that raises the value of the dollar (which makes the price of foreign goods even cheaper), pumps the US-foreign trade deficit, drains money from the US populace, and therefore slows the US economy. Like a string of dominoes, the markets, economies, and governments of the world reacts, and a cycle is set up...




















The figure above is what I believe is happening, not only to the US, but to much of the "western world" as well, including Europe. It is a "death-spiryl" where foreign-demand for US dollars (See "1." above) drains dollars from the US, slowing its economy, and creating a need for stimulus (on the part of the Federal Reserve or US Government) to revive the US economy.

In the meantime, those dollars (that went overseas in exchange for foreign goods) accumulate in foreign accounts (and foreign central banks where they are converted). Eventually those foreign banks (to get a return on those dollars) seek to reinvest those funds back into the US (a quarter of a percent in interest is better than nothing), giving the US (and US Government) ample funds from which to borrow.

Then there is the US economy. As the US economy drains of US dollars (and its economy slows), and as the Federal-Reserve refrains on creating new money (to control inflation), pressure mounts on the US government to "do something". The easy-out is for the US Government to connect that pool of growing foreign-held US dollars to US consumers. The US government borrows, deficit spends... all problems solved! Foreign governments now have their funds invested and are making a return, US consumers have new cash to invest, and the cycle repeats.

And around and around it goes !

Timing of economic cycles, therefore, is led by timing of US Government Deficit-Spending (and those rare occurrences of US Federal-reserve acquiescence to quantitative easing).

Next week... dealing with that cycle... as an investor.




-Robry825

Monday, June 11, 2012

Monday Morning Economic Assessment

The US Industrial economy inched ahead last week (if pipeline scheduling is correct), as consumption slowed its descent.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) reversed course from the prior week, rising to 124.2 (from last weeks 124.0). In its raw dailies (above) the week started soft, strengthened midweek, then softened into the weekend..

The Consumption Index declined for its fifth week in a row, easing to 141.3 (from last weeks 143.3). In its dailies the measure was soft early but strengthened into the weekend.

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

For the first time in months, however, internals are starting to appear supportive, suggesting the slowdown that started early in January may be over.

It's been a while since I posted on economics on the CWEI board (and the first-time for the BRY board - though others have regularly reposted in the past) so it's probably a good time to explain the basic assumptions of these "Economics Assessment" posts.

For some time I have followed natural gas pipeline flows (for investing in exploration & production companies), and as part of that process, broke down pipeline-posted natgas scheduling into a variety of supply and demand categories, including electrical generation, LNG imports, wellhead production, Canadian imports and Exports, and Industrial Usage to a great many industries across the US.

Those daily pipeline statistics for industrial usage, over the years, proved to track the economy quite nicely (judging by the monthly economic data releases) and seemed to peek and trough at the same time, and after several years I gained enough confidence in that correlation to begin to trust in the daily industrial data for my own investing purposes, and began to track and follow the natural gas scheduling into industrial facilities.

After realizing the value of the industrial natgas flow data, I modified most of my spreadsheets to break down the industrial flows by industry, and in that process noticed a correlation between cardboard (paperboard) manufacturing and consumer sales reports as well. Theorizing that cardboard packaging (being as it was a just-in-time shipping commodity) would be proportional to retail sales (most everything is shipped in cardboard in retail), that was modeled as well, as the consumption model.

The difference between those two models (industrial "Production Model" and retail "Consumption Model") then became the basis for a theoretical "Inventory Model", that is also included in these posts.

When the "Great Recession" started in 2008 (as pipeline scheduling first dived for paperboard (retail) then across the board in the industrial groups) after a time paperboard scheduling bottomed, and (suspecting an economic turn at that dismal time) I began the economics posts, and was able in 2009 to document the actual bottom as it happened near the end of the second quarter.

(Over the years in following these numbers I have formed an opinion of the basic causes of the economic cycles that have followed, and have been forced to change much of my thinking on the present "pop-economics" to bring my opinions in line with those of the gas flows, as well as present-day general economic, trade, and monetary statistics. Not to get too far off track here, I will save those thoughts for next weeks economics post. They really are off the beaten path!)

Back to todays modeling stats and observations...

Internally, food-group scheduling (historically counter-indicative of consumer-optimism) has broken well below prior years levels all the way through 2008 (the start of the recession), an indication of a fairly substantial gains in consumer optimism. Given the recent softness in the consumption index, I believe consumers are looking past the present gloom (perhaps to the November Elections) in expectation of change.

Steel-group scheduling (indicative of durable-goods), though still in the doldrums, is running ahead of May so far this month, the first monthly gain for steel since its January '12 peak. Steel's June turn is echoed across the metals groups.

The June strength is uncharacteristic for the metals, at a time when (going towards the traditional automotive retooling period in July) demand for metals generally trails off, and the automotive group (agreeing with the metals) is above prior years levels all the way back to 2008.

Also at multi-year highs are mining, refining and paper.

Housing continues to look sickly, with building materials, lumber, Masonry & brick, and cement groups all below prior-year levels for June. Masonry & brick and cement groups (new construction) are at multi-year lows (very tough year for homebuilders). Building Materials and Lumber groups are less soft looking (remodeling).




-Robry825

Monday, April 23, 2012

Monday Morning Economic Assessment

The US Industrial economy inched ahead again last week (if pipeline scheduling is correct), as consumption turned and added to its recent strength.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for its third week in a row, rising to 122.6 (from last weeks revised 122.1). In its raw dailies (above) the week actually was quite soft throughout, with the "Official" index rising mainly due to a softer week dropping off the end of its moving average.

The Consumption Index broke its recent string of three consecutive down-weeks and advanced, edging up to 145.8 (from last weeks 145.5). In its dailies the measure appeared unusually steady and (overall) averaged about the same as the prior week.

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

Overall, however, the internals retain that "sickly" look that they have exhibited throughout 2012, and as we emerged from the Easter Holidays looked somewhat bland (neither good nor bad).

Very disappointing how that March consumer-surge was ignored by the industrial side of the flows... as if that consumer-optimism was wasted on the productive end of US society.

Did note a sharp weakening in refinery scheduling (more than seasonals would imply) over the week and (in the latest days preliminary flows) a bearish sharp tightening in food-group flows and sharp weakening in industrial flows, that (as I saw no news) I am hoping to be bad data that gets revised tomorrow.



-Robry825

Monday, April 16, 2012

Monday Morning Economic Assessment

The US Industrial economy pushed forward again last week (if pipeline scheduling is correct), while consumption continued to back away from its March surge.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for its second week in a row, rising to 122.0 (from last weeks 121.0). In its raw dailies (above) the week started firm on Sunday but quickly gave ground and finished off the week soft.

The Consumption Index declined (its third consecutive down-week) to 145.5 (from last weeks record 151.3). In its dailies the week started somewhat firm (to the previous week) but softened late.

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

The split between industrial bearishness and consumptive bullishness (that dominated 2012's first quarter) should be conducive to healthy (and growing) 1st quarter earnings, though the defensiveness (so evident in the industrial flows) looks to be trying to seep into equities.

A lot of uncertainty remains this week as we emerge from the cross-currents of the Easter-Holiday period to settle into trends as the workweek unfolds.




-Robry825

Monday, April 9, 2012

Monday Afternoon Economic Assessment

The US Industrial economy turned and advanced last week (if pipeline scheduling is correct), while consumption again backtracked off of its March surge.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of four down-weeks in a row, rising to 121.0 (from last weeks 120.0). In its raw dailies (above) the week started strong (on the changeover to the 2nd quarter) and built on that strength as the week progressed.

The Consumption Index, conversely, declined (for its second week) to 151.3 (from last weeks record 155.6). In its dailies the week had a somewhat soft look but was much more stable than the prior weeks roller-coaster look.

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

A lot of uncertainty the next couple of weeks on the numbers in this report as we tread through the cross-currents of the Easter-Holiday period, as consumers jostle with seasonal norms and we just don't know what the consumers mood will be once the holiday is over and statistics can settle into trends.

Very much liked (however) the way the industrial gas-flows popped on the beginning of the second quarter (nice bounce in scheduling April first-on), and consumption and production are starting to (predictably) trend toward each-other.



-Robry825

Monday, April 2, 2012

Monday Morning Economic Assessment

The US Industrial economy declined again last week (if pipeline scheduling is correct), while consumption finally rolled over and joined in with the bearishness elsewhere.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) backtracked for its fourth week in a row, declining to 120.0 (vs last weeks 120.8), and is now at its lowest level since November 16rd (2011). In its raw dailies (above) the week started slightly firm early then softened midweek.

The Consumption Index also gave ground (breaking its prior string of four up-weeks in a row), declining to 155.6 (from last weeks record 160.3). In its dailies the week was dramatic, with the measure starting slightly soft (to the prior week) then plunging nearly 50% midweek.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), continued its long-term decline. The chart (above) this week was redrawn to cut the sensitivity to changes within the inventories measure.

The previous alarming growth (that gap between consumer-bullishness and industrial bearishness... worried about in last weeks economic post) is trying to resolve itself for the moment on the bearish side, and the next week will be crucial... especially given that we are passing through the first-quarter's end... a period of time when industrial books are closed on the quarter, and managers can reassess and change production (and purchasing) scheduling according to the newly-known prior quarters results.

The negatives in place (negative-economic-phase of production leading consumption, bearish food-group scheduling, listless steel-group scheduling, etc) are a grave threat to the economy.

One possibility of additional worry... that spike in paperboard scheduling might be indicative not of consumption at all, but merely a "bet" by retailers on a strong Easter Holiday... which may or may not materialize... based upon prior media bullishness which (so far) in 2012 has not been well-supported within the gas-flows.

If that were to be the case... than retail inventories are bloated and (if the consumer does not come in as anticipated) could produce a vicious snap-back.

Overall, I am still very worried and out of the markets in my trading accounts (though that is nothing to crow about so far as I have been out since the beginning of January) and recently (for the first time in years) toyed with a small short-position.

Next three weeks (as we proceed through the cross-currents of quarters-end and the Easter-holiday swings) will be crucial.



-Robry825

Monday, March 26, 2012

Monday Morning Economic Assessment

The US Industrial economy extended its recent slump again last week (if pipeline scheduling is correct), even as consumption continued to gain momentum.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) retreated for its third week in a row, declining to 120.8 (vs last weeks 121.8), and is now at its lowest level since November 23rd (2011). In its raw dailies (above) the week was soft Sunday through Wednesday, firmed up (vs the prior week) Thursday & Friday, then softened slightly again on Saturday.

Conversely, the Consumption Index added to its recent surge (its fourth up-week in a row and second strait record high), climbing to 160.3 (from last weeks 157.6). In its dailies the measure started the week strong, softened Tuesday, then came back over the weekend.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), continued its long-term decline. The chart (above) this week was redrawn to cut the sensitivity to changes within the inventories measure.

The rapidly growing gap between consumption and production is alarming, reflective to re-emerging bearishness within the business sector of the economy (even while consumers find their confidence). The rising gap is very conducive to a continuation and acceleration of healthy corporate profitability, although it also raises fears of renewed unemployment gains going forward, a further surge in imports, and an increased danger to acceleration in the core measures of inflation.

It may also signal that industry is starting to reassess the 2012 election returns as less likely to be bullish (White house not as likely to go Republican as thought before, therefore forget new hiring to go after new business... just in case), although investors (conservative, "Tea-Party" end of the Republican party) have not yet joined that bearishness in the realm of the equities markets.

I don't at all like the look of the industrial side stealing the initiative from the consumptive side of the economy (which it is trying to do right now). Should the investment side of the economy get spooked (and the stock market corrects), the economy looks dangerously vulnerable.

Food-group scheduling, while improving slightly with the consumptive surge, remains at strongly-bearish levels... implying little depth to the mile-wide width of that consumptive surge.

Still, I like that consumption surge (shallow as it is) and if the US government could get its act together and say the right things to that "other" half of the US economy (or if the industrial sector gets mesmerized by consumption before it collapses under its own weight) the economy could be built upon.



-Robry825

Monday, March 19, 2012

Monday Morning Economic Assessment

The US Industrial economy gave ground again last week (if pipeline scheduling is correct), as consumption continued its surging ways.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for its second week in a row, declining to 121.8 (vs last weeks 122.6). In its raw dailies (above) the week was overall flat the first four days of the week then softened sharply Thursday-on.

Conversely, the Consumption Index surged (its third up-week in a row), rising to a record 157.6 (from last weeks 149.2). In its dailies the measure was strong all week.

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

The record-breaking consumptive-surge looks very good in here... with retail sales likely surging... and corporate profits implied at very healthy levels, especially given the caution implied in the production-side of the economy.

The declines in industrial activity (especially given the bullishness in consumption) is disheartening.

I am somewhat doubtful of recent media reports that are giving credit to mild weather for recent economic strength. While a help, this surge in consumption appears much greater than that.

Unfortunately, the easing of the production index takes away from all that... blunting potential retailing employment-gains with industrial-employment stagnation. Probably the real gainer in all this is imports. We will see.

Still, I like the consumption surge, and hope to see some follow through on the industrial end (especially on the transition to the second quarter on April 1st). That is, if that consumption can hold. But we have got to get some follow-through somewhere in the industrial scheduling, where (at first glance) only the Mining / Minerals group is surging in tandem with the consumption (paperboard) indicator.



-Robry825

Monday, March 12, 2012

Monday Morning Economic Assessment

The US Industrial economy turned and retreated last week (if pipeline scheduling is correct), as consumption continued to rally.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of three up-weeks, dropping to 122.6 (vs last weeks 123.2). In its raw dailies (above) the week was mildly soft throughout.

The Consumption Index surged (second gain in a row), rising to 149.2 (from last weeks revised 138.1). In its dailies the measure was soft early (over the weekend) then firmed Monday-on.

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

The split between the gaining ways of consumption (breaking above previous short-term highs) vs retreating industrial production reversed the "polarity" of that relationship to negative (consumption trends diverging from industrial production), another worry to add to the bearishness of the internals.

If we could only get the industrial numbers back in line with consumption, we would have something meaningfully bullish for the economy.

Overall, the economy still looks uncertain going forward, with possibilities of either rapid-strengthening or rapid-weakening well-evident in the split between industry and consumers.

Overall... back to a flip of a coin (or flip of a political poll, or flip in current events, or flip in news reporting, etc).



-Robry825

Tuesday, March 6, 2012

Tuesday Morning Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), as consumption turned up after its previous pause.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for its third consecutive week, advancing to 123.2 (vs last weeks 122.7). In its raw dailies (above) the week was mildly soft.

The Consumption Index also gained (breaking its string of 3 down-weeks in a row), gaining to 138.1 (from last weeks revised 134.1). In its dailies the measure softened sharply mid-week.

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

While it was good to (finally) see the two lead indexes (Production and Consumption) sync in the recent industrial advance, the advance still retains its weak look... with food-group scheduling hovering at highly-bearish levels, and steel-group scheduling (indicative of durable-goods) softening in the latest week.

Overall, the 2011-4th qtr strength is now long-gone... and the economy still looks adrift... awaiting cues as to which direction to turn.



-Robry825

Monday, February 27, 2012

Monday Morning Economic Assessment

The US Industrial economy gained ground again last week (if pipeline scheduling is correct), while consumption continued its slow retreat.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for its second consecutive week, advancing to 122.7 (vs last weeks 121.9). In its raw dailies (above) the week began modestly firm then softened late.

The Consumption Index, conversely, declined for its third week in a row, falling to 137.6 (from last weeks revised 140.0). In its dailies the measure was firm throughout the week, although the overall index declined as an even stronger week fell off the back end of its 4-week moving average.

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

Internally, economic tension remains well-evidenced within the gas-flows (in stark contrast to the Fourth-Qtr-2011 flows which were clearly bullish almost to quarters end). The sea-saw nature of the Production & Consumption indexes (one climbs while the other falls, then vice-versa) is evidence that the "fulcrum" of the economy is unmovingly anchored in the mud.

The strength in the food-group last week was again worrisome. Food-group scheduling (now at strongly-bearish levels) has been contra-indicative to economic trends in the past, and its strengthening in here to such extremes is consistent with risk to the consumptive-end of the US economy.

Overall, the economy retains its adrift-look and continues to await cues as to which direction to turn.



-Robry825

Tuesday, February 21, 2012

Tuesday Morning Economic Assessment

The US Industrial turned and advanced (if pipeline scheduling is correct), recently-strong consumption continued to backtrack, and congress finally figured out how to "band-aid-up" the economy without killing it in the process.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of five down-weeks in a row and climbed to 121.9 (vs last weeks 121.3). In its raw dailies (above) the week saw the measure mostly throughout the week to its close.

The Consumption Index, conversely, put in its second down-week in a row... falling to 137.6 (from last weeks revised 140.0). In its dailies the measure started the week strong and maintained a firm look throughout the week.

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

Internally, economic tension remains well-evidenced within the gas-flows (in stark contrast to the Fourth-Qtr-2011 flows which were clearly bullish almost to quarters end). The sea-saw nature of the Production & Consumption indexes (one climbs while the other falls, then vice-versa) is evidence that the "fulcrum" of the economy is unmovingly anchored in the mud. The strength in the food-group indicative of doubt in the consumption that drives the economy.

I was glad to see congress finally able to come to grips with the payroll-tax-et-all issues without the traditional public airing-of-the-dirty-laundry. That is not to say that there is no dirty laundry... but that they were actually able to get something done without resorting to flinging the stuff down the Capitol-Hill steps!

Overall, the economy appears adrift and continues to await cues as to which direction to turn.



-Robry825

Monday, February 13, 2012

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) backed off one more notch, as recently-strong consumption eased.

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, slipping to 121.3 (vs last weeks 121.4). In its raw dailies (above) the week started soft but restrengthened sharply late in the week.

The Consumption Index broke it's string of three up-weeks in a row, slipping down to 140.0 (from last weeks revised 143.0). In its dailies the measure mildly followed the pattern of the production index (soft early then strengthening late).

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

Internally, tension appears to remain within the economy between uncertain consumption and retreating industrial production, with steel-plant inputs (indicative of durable-goods) soft, and food-group scheduling bearishly strong. There is a glimmer of hope, however, in the late-week strengthening... if it can hold.

Overall, the economy appears adrift (following late Decembers "$40-a-week-payroll-tax-in-two-months" congressional signal). On the horizon that payroll tax increase (due the end of the month) is probably about to come back into focus, and how that gets dealt with probably shapes 2012 going forward.

Still waiting for Congress (and the Federal Reserve) to get their acts together.



-Robry825

Tuesday, February 7, 2012

Tuesday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) continues to retreat, as strong consumption questions itself.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its fourth week in a row, slipping to 121.4 (vs last weeks 123.0). In its raw dailies (above) the week started slightly firm but resoftened late and into the weekend.

The Consumption Index worked higher for it's third week in a row, edging up to 142.0 (from last weeks 142.7), setting another high for the fall recovery. In its dailies, however, the measure contradicted itself internally... with sharply-weakening data points (throughout the week) more than balanced out by even weaker data that fell off the end of the overall index's 4-week moving average.

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

Internally, there appears great tension within the economy between uncertain consumption and retreating industrial production, with steel-plant inputs (indicative of durable-goods) soft, and food-group scheduling bearishly strong. Worse, the peak in the consumption index is following the peak in the production index, and (unless consumption can turn the production index and not vice-versa) puts the momentum back into the hands of a bearish production index (this will have to be watched... if it does pan out it is both rare, and frightening).

Overall, the economy at best appears adrift following late Decembers "$40-a-week-payroll-tax-in-two-months" congressional signal, and at worst may have peaked and started a contraction, as consumers appear skittish and industrial production is in full retreat.

On the horizon that payroll tax increase (due the end of the month) is probably about to come back into focus, and how that gets dealt with probably shapes 2012 going forward.

Congress (and the Federal Reserve) remain to get their acts together.



-Robry825

Monday, January 30, 2012

Monday Morning Economic Assessment

The vacation is over, as is this falls advance in the US Industrial economy (if pipeline scheduling is correct). Industrial production has backed off and gas-flow internals soured. Consumption, following last months "$40-a-week-payroll-tax-in-two-months" congressional signal, reversed its plunge and is trying to make a stand.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) peaked January 9th (124.4), just shy of its 05/31/11 all-time high (124.8). It then went on to complete three down-weeks in a row, declining slowly to 123.0 (vs last weeks 124.2). In its raw dailies (above) for the week just completed, the measure was slightly soft overall.

The Consumption Index conversely had its second straight weekly gain, rising to 142.7 (from last weeks 136.9), and just set high for the fall recovery. In its dailies the measure started the week strong then sharply weakened midweek-on.

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

Internally, the consumption-spurt (which centered around the 01/19 through 01/24 period) was not well supported, with steel-plant inputs (indicative of durable-goods) flat, and food-group scheduling in January bearishly soaring to multi-year highs. Worse, the peak in the consumption index is following the peak in the production index, and (unless consumption can turn the production index and not vice-versa) puts the momentum back into the hands of a bearish production index (this will have to be watched... if it does pan out it is both rare, and frightening).

Overall, the economy is adrift, with the sound of thunder in the dead-still air.

Congress (and the Federal Reserve) need to get their acts together.



-Robry825