The US Industrial economy advanced again last week (if pipeline scheduling is correct), with solid gains implied in both US Industrial Production and Consumption.The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for its fourth week-in-a-row, rising to 118.3 (from last weeks 116.5). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started firm and remained robust through to the weeks close.
The paperboard-based Consumption Index added to its Fall-2010 surge, rising (for its second week in a row) to 143.8 (from last weeks 140.1). In its dailies the measure started firm though eased slightly through its close. The Consumption Index is nearing its Oct-2009 all-time high 146.5, suggesting perhaps we may be looking to a similarly-strong Christmas as we had in 2009.
The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.
For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. And the recovery looks to remain a jobless recovery (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).
In fact (looking at the gas flows), it is very difficult to be able to tell that we are in a "recession" at all. If one were to ignore the abysmal employment data and focus solely on gas-flows, that hole-of-a-recession we dug ourselves into during 2008 has already been filled, and we look about to boom. So why the present-day dismal unemployment?
Within the gas flows, the large gap between implied consumption and industrial production, the duration of that gap (18 months), the seemingly never-ending decline in the inventories measure (especially against the slow build implied within Industrial Production), and the recent reluctance of the Production Index to "break out" to the upside as the Consumption Index has done, all suggest extreme negativism (and caution) within the business & investment end of the US economy.
With such negativism in business and investment, capitol formation (investment) and labor formation (hiring) is severely impaired. Contrast that with the robustness of consumer-spending implied by the Consumption Index, and a terribly unbalanced economy (crafted by a terribly unbalanced political "economy") is betrayed.
With Midterm US Elections now 8 days away (judging by the polls)... the US public is on to this at least to some extent. And given recent press, that unbalanced political "economy" is about to change.
One has to be thinking now of voter fallout after the elections pass. Polls and press seem to be suggesting the possibility of strong Republican gains come November, and allude to I think favor a slim Republican recapture of the House of Representatives with strong Republican gains and a chance of Senate control as well.
But what will that (potential) change of political balance bring about? Will investors & business leaders (seeing the political changes) take heart and invest & hire to chase new business, or sit back and wait to see what happens? Will consumers loose confidence on the political fallout? Will a rebalanced government work wisely, or fall into combative stalemate to the ruin of the economy? Or, will the polls be proved to be wrong? Time will tell.
One thing I know... we have a lot of very sharp business people in the US, very creative workers, very motivated consumers, and a whole lot of people that want to see is this economy work. Just give them the chance...
-Robry825
