Tuesday Morning Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), as both industrial production and consumption advanced. The congressional "$40-a-week-payroll-tax-in-two-months" standoff-deal reached Thursday appeared to be poorly received within the gas flows.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for the 10th time in the last 11 weeks, rising to 124.0 (vs last weeks 123.5), its highest reading since June 6th, and closing in on its May 31st all-time high (124.8). In its raw dailies (above) the week started firm then softened late.

The Consumption Index had its second straight weekly gain, rising to 138.9 (from last weeks 136.9). In its dailies the measure started the week strong then sharply weakened midweek.

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

The congressional payroll-tax deal appeared to give consumers pause, as Thursday's announced compromise seemed to coincide with a spat of scheduling-downticks within the gas-flows, and with all of the cross-currents of the wind-down of the Christmas-Shopping season, risk to the economy (and the markets) has to be assumed to be growing.

Friday Mornings batch of gas-flow data was so troubling it knocked me out and heavily into cash. Being an investor that relies solely upon personal trading for a living, I tend to play the cowards roll (can't afford a flat year) so I sometimes tend to be on the early side, and the markets should still have some good news in the pipeline (especially for the last week & the month of December) which hopefully will be somewhat supportive and give the consumer (and/or government) a chance to get back on track. Hopefully.

ROBRY VACATION NOTE: As it has been quite a while since our last vacation, we have decided to take a break and will be headed south for warmer climates for a break. While the reservations are not quite done with yet, I anticipate heading out by the weekend, so there will be a break in the economics posts for approx three weeks.

Regarding the early primaries (and considering that payroll-tax-blunder and weakening gas-flows) I suspect the anti-party sentiment gets pumped up from here. I still think a Ron Paul "ascendancy" has to be risked into ones investment/business outlook (whether you like him or not). Gut feeling is (unless economic & political patterns change) Ron Paul takes both Iowa and New Hampshire, then steamrolls (flattening everyone else) after that.

Republicans are looking for a "Ronald Reagan" (Outsider with apparent wisdom) and Reagan was often described as the "Teflon President" in his early years (in that "nothing would stick"). George Bush (Sr) remarked of Reagan's economic ideas as "Voodoo Economics" in the 1980 primaries (anyone remember those... hard to believe 32 years ago!). We had high unemployment back then too. Big-time political change often follows big-time unemployment.

Major political realignment within both political parties over the next three years to me appears likely. If Ron Paul is elected (which assumes further economic deterioration), gut feeling is major political upheaval follows in the Democratic Party (if it survives intact) in 2013-2014.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy took a big leap forward last week (if pipeline scheduling is correct), with pronounced gains to both the production and consumption index, as the 2011 Christmas-shopping season continues to rapidly strengthen. A bullish "event" to the economy appeared to happen Wednesday (Dec 14th) across the gas flows and especially into consumption.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) climbed for the 9th time in the last 10 weeks, rising to 123.5 (vs last weeks 122.6), its highest reading since June 15th, and closing in on its May 31st all-time high (124.8). In its raw dailies (above) it was an exceptional week, gaining a whopping 5% over the prior week alone and easily eclipsing seasonals.

The Consumption Index advanced as well (breaking its previous string of three off-weeks in a row), lifting to 136.9 (from last weeks 133.3). In its dailies the measure started the week firm and maintained that strength throughout the week.

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 remains firmly supported by last weeks bullishness to both production and consumption, and is well-evidenced in the firmness of the Aluminum, Automotive, Copper, Food, Glass, Paper, and Refining flows, and is also supported by recent-firming trends in Steel (indicative of durable goods starting to rebound), and meekness within the Food-Group measures.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy continued to strengthen again last week (if pipeline scheduling is correct), while consumption continued to moderate 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 8th time in the last 9 weeks, rising to 122.6 (vs last weeks 122.0, its highest reading since June 21st. In its raw dailies (above), the measure started modestly soft the first half of the week, then firmed.

The Consumption Index continued its retreat from previously-robust gains (3nd off-week in a row). The measure declined to 133.3 (from last weeks 135.2). In its dailies the measure started the week soft but firmed late.

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 remains somewhat supported by firmness in industrial (factory) natgas-scheduling, the remaining gap between production and consumption, and the late-week strengthening to both indexes... with good evidence of the turn to recovery evidenced in steel scheduling (evidence of the beginnings of a durable-goods recovery), along with automotive scheduling.

Concern remains for the recent softness in the consumption index, and recent hawkishness in Federal Reserve policy enabling further liquidity-drains from the US, theoretically capping economic expansion and questioning the sustainability of the recent economic advance.

Corporate profitability still looks to be solid (so far) for the 4th quarter.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy continued higher again last week (if pipeline scheduling is correct), consumption continued to moderate from its recent strength, and the US Federal Reserve finally relented and added some stimulus to the economy... of Europe.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) climbed for the seventh time in the last eight weeks, rising to 122.0 (vs last weeks 121.0, its highest reading since June 24th. In its raw dailies (above), the measure was only slightly soft for the Thanksgiving holiday weekend, strengthened slightly midweek, then re-softened a tad late. Taking seasonals into account, the week was firm.

The Consumption Index looked like a stock in "Profit-Taking" mode, giving back a little more of its previously-robust gains (2nd off-week in a row). The measure backed off to 135.2 (from last weeks 137.0). In its dailies the measure started the week soft but firmed over the Thanksgiving holiday period.

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

Data quality within the gas-flows was a little off, with the significant California utility PG&E's web-site down along

For the time being, the economy remains supported by firmness in industrial (factory) natgas-scheduling, the recently-widened gap between the production and consumption indexes, and perhaps a bit less pessimism in the deeply-pessimistic US industrial sector.

Concern remains for the recent 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, in spite of last weeks generosity to Europe), theoretically capping economic expansion and questioning the sustainability of the recent economic advance.

Corporate profitability still looks 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 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

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) gained more ground last week, even as consumer spending stalled and eased off a notch.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its third up-week in a row, rising to 119.7 (vs last weeks revised 118.8). In its raw dailies (above), the measure was mostly flat and followed quite closely the previous weeks numbers.

The Consumption Index, conversely, broke its string of five weekly gains, dropping to 137.5 (from last weeks revised 137.6). In its raw dailies the measure had a flat, somewhat lackluster look.

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

As with last week, food-group scheduling continues to underpin consumption, even as consumption stalls... a sign that consumer confidence, though up, may be more confidence in "the other guy" than self. Steel group receipts (reflective of durable goods) continue to look lousy.

Overall, until steel improves, everything is questionable and Federal-Reserve policy makes it doubtful. My thinking remains that nothing less that a QE-3 will do, and the economy heads south within the next few weeks without the Federal Reserve.


(Political wild-speculation department... my thoughts from a couple months past...)
"Perry campaign gets killed from within (by its own staffers), Romney from without (boredom), and Ron Paul
takes the Republican Primaries and the Presidency in 2012. Possible Democratic "Hail-Mary"... Democrats
accept the Republican balanced-budget amendment idea (it gets forced anyway in next few years) in return
for token higher Republican Taxes, then fire the whole of the Federal Reserve board and ... ... ...) (That is, if
the Federal Reserve is freezing up politically and unemployment retakes double digits.)"

The thoughts on the Perry and Romney campaigns look to right so far, although Ron Paul has yet to emerge. Instead, Herman Cain has come to the top, which I think makes sense given the deep troubles within the gas flows (am thinking all of America is going to be in a real mood to "Roll the Dice") and extremism on taxes (Herman Cain) and a bunch of other stuff (Ron Paul) will actually be liked once the thick of the Republican Primaries and 2012 Elections commence.

(This very much reminds me of the late-1970's malaise when Ronald Reagan was elected, and that little old "Voodoo economics" tag by then-candidate George Bush probably helped to cement Reagan's eventual election by an electorate that then was ready to "Roll the dice" too.)

But will it be Herman Cain or Ron Paul? Tougher question than Perry vs Romney vs Paul, and investing will be a lot different under Herman Cain than under Ron Paul. I am still thinking Ron Paul, but a lot tougher call.

On the Democratic side, nobody should (rationally) want to run against the president (without infuriating a lot of folks and being made to look an out right traitor), although in the end (by looking at the gas flows) the President is toast in the 2012 elections. One would think the Federal Reserve is Republican and trying to undermine the economy to destroy the Democrats in 2012 (judging by the Federal Reserves ending of the Quantitative Easing programs as the primaries approach and the economy slides), and no doubt there is knowledge of all of this at the White house.

So on the Democratic side, one has to risk ones investments outlook to an extreme move on Federal Reserve oversight by the Executive Branch, and I think it more than likely than not that the Federal Reserve gets "Shook up" by the 2012 elections (more likely by the end of 2011) unless the Federal Reserve does something really, really bold quickly before the economy really, really tanks.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) advanced again smartly last week, while consumer spending added to its recent string of gains.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for its second week in a row, climbing to 118.9 (vs last weeks 117.7). In its raw dailies (above), the measure was impressive...looking firm throughout the entire week.

The Consumption Index also gained (for its fifth week-in-a-row), lifting to 137.6 (from last weeks revised 135.5). In its raw dailies the measure was slightly softer than the previous week, though the overall measure reflected stronger gains as a much-softer week fell off the end of its 4-week moving average.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), again continues its re-acceleration to the downside as the spread between consumption and production continues to widen.

Within the gas-flows, there remains support for the consumptive upturn (of the past 5 weeks), however, steel-group scheduling continues a grave concern (durable-goods still look a mess), and without some further external stimulus (Federal Reserve QE-3, foreign binge-buying of US equities, etc) long-term extensions of the present short-term trends look questionable.

Saw a bumper sticker the other day, something to the effect of ... "Care About Jobs... Stop Buying Foreign !". Now Michigan (Robry's home state) is big on automotive production (the Detroit area known as the "Motor City"), and folks up here are really suffering unemployment in this economy... even as imports of all types (including automotive) soar.

Now that bumper sticker has (more or less) been around Michigan for decades (can remember them in the 70's), and it evokes tensions between employment and consumption... with employment (especially the big auto-unions) pushing for trade-protection (to defend industry and jobs) even as consumers prefer the choice that imports give them on style and price.

But that bumper sticker, for the first time, really struck me... as I (for the first time) saw a third element in it that I am sure those two sides miss completely.

That third element relates to neither employment or consumption. It has nothing to do with neither union or consumer. It is neither Democratic nor Republican. That element is an assumption that is insidious (and if I might say as a Christian, pure evil) that (in its truth) tears at the heart of the economy and the nation.

The third element of that simple little"Care About Jobs... Stop Buying Foreign" bumper sticker is an implied, forced, like-it-or-not choice... that we must choose between a foreign-built car, or a US-built car (and by extension the US must choose between foreign goods and US-produced goods)... meaning that we are NOT allowed both.

That is, there is someone (or some thing) that puts a cap on the free market, rationing supply to demand. Literally... Buy a car from India, Detroit must make and sell one car less. Buy a car from Detroit, India must send one car less. Build an automotive plant in China dedicated solely to US consumption, and one automotive plant in the US must be shut down!

The trouble is... I see reality in that "Care About Jobs... Stop Buying Foreign" bumper sticker. I see a Federal Reserve, in its blind ambitions to defend against non-existing inflation, restraining the US economy to the point of forcing that choice.

And if that is true (that production of goods are capped), then... (1) the production of ALL goods is capped (including goods made in the US),... (2) the US standard-of-living is capped,... (3) the US economy is capped, and... (4) US employment is capped.

(I believe it to be true.)

Unfortunately, it appears to me at present, that the US is all but blind to this economic-capping, and that the US population is lowering itself to a "Democrat vs Republican" fight over each-others slices of a rapidly-shrinking economic-pie, rather than to join together to defend the whole of that economic-pie.

I think that the nature of the shrinking of that "economic pie" is well evident in the growth of the US National Debt, the growth of the US Gross External Debt, the growth of US consumer-debt of all types, the ultra-low interest rates (courtesy of the US Federal Reserve) to keep the borrowing growing, and the growing ownership of US equities and industry by foreign interests.

When will the US wake up to this? Time will tell.



-Robry825

Monday Morning Economic Assessment

The summer micro-recession appears over as industrial natural-gas scheduling finally ignited last week on the heals of three-straight weekly gains to the consumption index.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of seven down-weeks in a row and took off, rising to 117.7 (vs last weeks 116.4), after reaching its lowest point since October-2010 the week before. In its raw dailies (above), the measure firmed early, surged Tuesday, and finished the week strong.

The Consumption Index also climbed (for its fourth week-in-a-row), gaining to 135.5 (from last weeks revised 134.5). In its raw dailies the measure was choppy though generally firm, with a one-day surge on Tuesday coinciding with the surge in the Production Index.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), continues to re-accelerate to the downside as the spread between consumption and production widens.

Also of note... the "polarity" (phase) of the economy shifted back from negative to positive (even as the economy shifted from contraction to expansion), meaning that the leadership within the economy is assumed to have changed back to consumption (as is normal in both upturns and downturns), and away from the strange patterns throughout the summer downturn of industrial production leading consumption.

Within the gas-flows, there remains good support for the consumptive upturn (of the past 4 weeks) in food-group scheduling, which remains well-off of their bearish-looking strength of the summer.

Steel-group scheduling, however, remained flat for the week... an indication that the emerging uptrend has yet to hit the durable-goods sector.

Outlook for 3rd-quarter equity earnings remains positive as consumption never broke down below production (as it did three years ago when the deep recession appeared unanticipated in the gas flows), and 4th-quarter earnings outlook remains positive as well given the quarter-beginning economic strength within the gas-flows.

For the longer-term... Federal Reserve policy remains repressive to the economy, maintaining and encouraging strong liquidity flows out of the US and into foreign interests (by way of the enormous trade deficits siphoning liquidity out of the US, where that liquidity is not subsequently replaced by the Federal Reserve), so substantial economic gains will be difficult probably once past the Christmas-shopping rush (if not before).



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) backed off one more notch last week, while consumer spending again pressed upward.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its seventh down-week in a row, backing off a notch to 116.4 (vs last weeks 116.5), and at its lowest point since October 16th, 2010. The measure put in a low of 116.2 on Thursday, before turning up Friday and Saturday. In its raw dailies (above), the measure was soft early before flattening late.

The Consumption Index gained for its third week-in-a-row, rising to 134.5 (from last weeks revised 129.1). In its raw dailies the measure started soft (to the previous week) but benefited from weaker numbers falling off the back of its 28-day moving average.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), is now re-accelerating to the downside as the spread between consumption to production has increased.

The quarters-beginning (spoken of in last weeks comments) failed to see a response in the Production Index to the recent rally in consumption, reaffirming the strange nature of the present "Micro-recession", as the Production Index thus far continues to resist (rather than follow) the consumer. We very much need to see both Fridays upturn in the Production Index (and the three-week-old rally in the Consumption Index) continue... to re-establish normalcy back into the economy.

Absent that, we will have what is best described as a "negative-polarity" recession (to borrow a phrase from electronics), or a "negative recession"... which would (if it continues to follow its patterns of the last few months) be a monster quite different from the beasts of the last recessions (and I assume the great depression), with theoretical surges in unemployment, corporate profitability, and inflation all at the same time... leading initially to massive transfers of wealth out of the lower & middle class and into the hands of the upper-class, then ultimately out of the upper-class and out of the country by way of panic-driven taxation (upper-class to consumers to foreign interests) where ownership of US industry follows the ownership of US money-supply out of the country (via export drains) and the US goes third-world.

Unfortunately, all this remains to look like a "Federal-Reserve-Problem" and not a "Government-Problem", and any attempt by government to "fix" the problem (aside from either reforming or replacing Federal Reserve policies) probably will serve only to "enable" Federal-Reserve oversight of the continual drain of wealth out of the US.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) continued to backtrack last week, while consumer spending continued to rise.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its sixth straight week, easing to 116.5 (vs last weeks 116.8), and at its lowest point since November 22nd, 2010. In its raw dailies (above), the measure was soft throughout the week.

The Consumption Index, on the other hand, continued to build on its gains of the past two weeks and accelerated... rising to 129.1 (from last weeks revised 124.3). In its raw dailies the measure was strong throughout the week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), long in decline, continues its attempt to flatten out as consumption trends have been falling faster that production.

Last weeks noted "sliver of hope" has blossomed quite nicely (in the gas flows) into a respectable attempt at recovery, with good support building in the food-group, which finally completed a decent month in September... breaking a long string of bearish record-breaking months

We now look to the Production index for signs of conformation as the new quarter begins. (Major changes to the Production Index like to occur on monthly or quarterly changeovers... presumably as industrial production scheduling gets adjusted to prior months/quarters actuals.)

We very much need to see the unfolding consumer-gains both (A) continue, (B) spread into the production index, and (C) spread into steel-group scheduling (as per the "Part 8" posts on InvestorVillage CWEI board) to abort recession.

The US consumer has had to overcome a mountain of negativism in press, government, and finance (declining equities) th achieve what it has so far, and industry will have to overcome its own negativism and allow consumption to lead once again (as consumption has led the economy in prior years).

If consumption can keep it going a couple more weeks, I think it will get a boost from a turn in equities as investors should like what they see in 3rd quarter earnings (Production has held below consumption on industrial negativity, which in the past has lead to good quarterly-earnings results... so I look for rising stock markets as the fourth-quarter unfolds).

The longer-term-downside-risk remains, however, with the Federal Reserve remaining on the sidelines as trade-deficits continue to hemorrhage liquidity and build US debt. While the economy can gain on a bounce, serious longer-term economic (and employment) gains remain to look unlikely... without Fed accommodation.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) continued to ease last week, while consumer spending inched modestly higher.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for its fifth straight week, easing to 116.8 (vs last weeks 117.0), and at its lowest point since November 24th, 2010. In its raw dailies (above), the measure was somewhat flat with just a bit of re-softening late in the week.

The Consumption Index, conversely, again showed a sliver of strength (2nd up-week in a row) by rising to 124.3 (from last weeks revised 123.8). In its raw dailies the measure continued to show the firmness of the prior weeks-end, though the week only was modestly bullish vs seasonals.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), long in decline, continues its attempt to flatten out as consumption trends have been falling faster that production.

Overall, gas-flows continue to look like mush, with the economy continuing to recede from its May-31st peak... implying negative GDP growth for the third quarter is likely. Whether the present "micro-recession" extends long enough to become "official" looks to me to continue to be mostly dependent on the US Federal Reserve (who, judging by their actions, must like 9% unemployment)... with government having the ability to only make things worse, not better.

Government ineptitude appeared to hit a new high last week, with the President talking up tax hikes (doubled-down to $3 trillion from $1.5 trillion last week), as key Republicans lobbied the Federal Reserve to end the monetary stimulus of its recent quantitative-easing programs. The Federal Reserve, for its part, entertained itself by doing the "Chubby-Checker-Twist"... sending global stock and commodities markets reeling.

However, the smallest of slivers of hope is appearing, in that consumption is trying to make a turn the last couple of weeks, even while industry retrenches and investment retreats. The consumption index remains meekly above the production index, so we are hanging on just above levels where downward spirals can commence, hence the economy is trying to make a stand.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) gave more ground last week, while consumer spending woke from its long nap with a yawn.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for its fourth week in a row, now down to 117.0 (vs last weeks revised 117.7), and at its lowest point since November 25th, 2010. In its raw dailies (above), the measure was soft vs the prior week, and especially soft against seasonals.

The Consumption Index, however, showed some signs of life, breaking a string of 5 down-weeks in a row by rising to five straight weeks, dipped to 123.8 (from last weeks revised 122.2). In its raw dailies the measure started very soft but quickly firmed against the prior weeks excessively-dismal numbers surrounding the Presidential-Address / Republican-Debate Combo Wednesday & Thursday nights.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), long in decline, continues its attempt to flatten out as consumption trends have been falling faster that production.

Overall, gas-flows continue to look mushy, with the economy slowly receding from its May-31st peak... implying negative GDP growth for the third quarter is likely. Whether this present "micro-recession" extends long enough to become "official" looks to me to continue to be mostly dependent on the US Federal Reserve (who, judging by their actions, must like 9% unemployment)... with government having the ability to only make things worse, not better.

Some good news on the political front... President Obama announced a very aggressive plan to combat governmental-deficit spending, by hiking taxes by 1.5 Trillion on investors. Democratic researchers have come into discovery of a tendency by investors to invest more in capital-formation (which generates more hiring) when the government takes a much higher share of their income.

The theory is the more investors are taxed, the more money they have left to hire and boost employment, and that 1.5 Trillion will be sufficient to reach full employment. The economy will be humming in no time!

Republican researchers, on the other hand, are exploring emerging trends that cutting government spending to drain money from consumers hands is likewise stimulative of consumption, and are expected shortly to announce draconian plans for similar cuts to consumers to spur their consumption. This should be a boom to retail sales... further propelling the economy.

(How hard it is to think "outside the box", when your campaign contributions come from "inside the box".)

Not to worry, though... the US dollar is hitting 6 month highs as we speak against the DXY... so that little unemployment check will go a little further at the local (foreign) retail store than it used to.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) continued its retreat last week along with consumer spending, while Washington's mid-week "scare-em-up" was a resounding success...sending consumers scurrying for cover.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for its third week in a row, dipping to 117.7 (vs last weeks revised 119.0), and is now at its lowest point since November 30th, 2010. In its raw dailies (above), the measure was somewhat firm vs the prior week, though the week was very soft once seasonal norms were added in.

The Consumption Index, now down for five straight weeks, dipped to 122.0 (from last weeks revised 125.3). In its raw dailies the measure was very week, and dismally weak Tuesday, Wednesday, and Thursday as consumers looked as if they hunkered-down for the Presidential-Address / Republican-Debate Combo Wednesday & Thursday night, before finally scurrying out of the bomb shelter to buy a few necessities Friday.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), long in decline, is trying to flatten out as consumption has been falling faster that production.

Overall, gas-flows continue to look mushy, with the economy slowly receding from its May-31st peak... implying negative GDP growth for the third quarter is likely. Whether this present "micro-recession" extends long enough to become "official" looks to me to continue to be mostly dependent on the US Federal Reserve (who, judging by their actions, must like 9% unemployment)... with government having the ability to only make things worse, not better.



-Robry825

Tuesday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) continued its retreat last week, consumer spending continued to languish, and signs of the beginnings of the traditional (seasonal) September-ramp-to-Christmas were (so far) meek.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gave ground for its second week in a row, dropping to 118.9 (vs last weeks revised 120.0). In its raw dailies above, the measure was soft the start of the week then strengthened a bit late on the transition to September and the Labor-Day Holiday. Against seasonals the measure was very soft throughout the week.

The Consumption Index extended its slide for its fourth straight week, dipping to 124.8 (from last weeks 132.1). In its raw dailies the measure was choppy but overall week, and against seasonals especially so.

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

Overall, gas-flows continue to look like mush, with the economy dead-in-the-water. Employment (not business profitability) looks to be taking most of the hit at the moment, though as the consumption index nears the production index, business will have to cut production runs if consumption slides much further if it wants to isolate itself from financial harm.



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) backtracked last week, while consumer spending continued to retreat and the Federal Reserve sat on its hands.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its three-week string of gains, backing off a notch to 120.0 (vs last weeks revised 120.2). In its raw dailies above, the measure was bland.

The Consumption Index extended its fall for a third week-in-a-row, slipping to 132.1 (from last weeks 139.6). In its dailies the measure was likewise bland (to production) except for Monday's comparison with the previous weeks anomaly.

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

Overall, gas-flows look like mush, with the economy dead-in-the-water, though employment (not business profitability) looks to be taking the hit at present.

Federal Reserve starting to look like it is becoming politically paralyzed... with some leading Republican-presidential-wannabes sending strong signals of stimulus-intolerance (Perry) or Federal-Reserve menevolence (Ron Paul), while the Democratic party (and president) 2012-hopes get eaten alive by the economy.

If so, the entire burden of monetary expansion falls to the US government... to expand the pseudo-money supply (by way of deficit spending) at the sole cost of inflating government debt, as the US dollar holds firm... and $2 billion-a-day of US liquidity continues to get siphoned from the US economy.

(Wild-speculation department... Perry campaign gets killed from within (by its own staffers), Romney from without (boredom), and Ron Paul takes the Republican Primaries and the Presidency in 2012. Possible Democratic "Hail-Mary"... Democrats accept the Republican balanced-budget amendment idea (it gets forced anyway in next few years) in return for token higher Republican Taxes, then fire the whole of the Federal Reserve board and ... ... ...) (That is, if the Federal Reserve is freezing up politically and unemployment retakes double digits.)



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) reclaimed a bit more ground last week, while consumer spending retreated. All models were revised as additional points were added to the respective samplings on which the modeling is based.

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, gaining to 120.2 (vs last weeks revised 119.9). In its dailies, the measure lethargic, starting the week firm early-on but quickly softening as the week progressed.

The Consumption Index conversely fell for the second straight week, dipping to 139.6 (from last weeks 143.9). In its dailies the measure was choppy but overall soft as well.

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

Overall, its the same-ol'-same-ol'... with the economy dead-in-the-water... along with the Federal Reserve.

Bear market in stocks starting to look a bit overdone (in terms of the gas-flows)... this does not look like anything like an earnings-hit for the third quarter but if anything the opposite given the "reverse" nature of the slow-down (it is business-confidence that is being hit... along with investor-confidence... but not consumer spending so it will be bullish for earnings, not bearish).

What is being hit right now (big time) is employment... and over the last three weeks one can see a real split in the "Republican" side of the US economy (business vs investment community) with the business-side looking like it liked the centrist-budget compromise (gas-flow-scheduling increased to industry briefly following the announced budget-compromise three-weeks ago, while investors discouragingly dumped their investments and consumers appeared little-changed in their spending habits).

This recent three-way split has me rethinking my 2-Party Republican-vs-Democrat Gas-Flow Theories... Perhaps we actually have a three-party system with Democrats representing the consumer, Centrist-Republicans representing business, and Conservative-Tea-Party-Republicans representing investors.

If you think about it, the theory makes sense as the business community has to bridge the gap between consumer and investor... delivering quality and economy to consumers balanced with earnings to investors... compromising along the way to keep things balanced to make the business work, even while consumers and investors focus in on their own bargains or profits.

Of course, government (like business) would have to also balance the needs of all three of these three groups (consumer, business, & investment), which it is having great difficulty doing given the political-divide in Washington where folks think the problem is fiscal.

Raising taxes on investors will not encourage them to invest more on new businesses and new employment. And cutting spending to consumers will not encourage them to spend more to soak up excess industrial capacity. What we have at the root is monetary-policy failure, with fiscal-policy failure attempting to negate that monetary-policy-failure.

Think about it... we dropped interest rates to zero and bumped deficit-spending past a trillion-dollars-a-year to boost the economy... with nothing to show for it. It is not supposed to work that way.




-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) gained last week, while consumer spending was flat and the Federal Reserve entertained itself... saying it would change nothing, but seeking to reassure everyone with the promise that it would do so for the next two years.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) climbed for its second week in a row, rising to 120.4 (vs last weeks 119.3). In its dailies, the measure was mostly firm over the prior week.

The Consumption Index followed two weeks of gains by going flat, settling at 146.5 (from last weeks 146.5). In its dailies the measure was very soft.

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

Overall, gas-flows are mush and the economy appears to remain dead-in-the-water... neither advancing nor retreating... while consumption, steel-plant scheduling, and food-group scheduling all look ominously bearish.

Economically-speaking, I assume the economy to be barely hanging on by its fingernails, in spite of massive governmental deficit spending to prop it up.

Over the last 12 months, over $538 Billion left the US through the continuing trade deficits (see link below for data). Over the past 2 years... $995 Billion. Over the past 4 years... $2.2 Trillion. Over the past 8... $4.9 Trillion. Over the past 16... $6.4 Trillion. That is goods & services imbalances only... not including interest payment on debt, foreign aid, or all those dollars good-natured Americans send to help the needy in other countries, etc.

Check my math (please) at http://www.census.gov/foreign-trade/statistics/historical/exhibit_history.prn to see for yourself.

Those billions of dollars are gone... now in possession of foreign central banks around the world, who (viewing the US dollar as the worlds reserve currency) stockpile dollars the way they used to stockpile gold. The whole of the US monetary base (as of July 2011) was only $2.68 Billion (see http://www.federalreserve.gov/releases/h3/hist/h3hist1.txt), leaving the US deeply in debt (14.8 Trillion Gross External Debt, as of 03/31/11, as per http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/debta311.html)

With the Federal Reserve holding down the Monitary Base in the face of these monitary outflows, that cash has to be recycled back into the US economy by means of borrowing and deficit spending (by the US Government) to get that cash back into consumers hands. In the process all forms of debt accumulates... from government debt, to consumer debt, business debt, student debt, credit-card debt, etc... with Federal-Reserve-pushed ultra-low interest rates to entice people to borrow more to extend the madness.

One has to wonder at the success of the Federal Reserve at controlling inflation. Does the Federal Reserve control inflation by means of money supply... or does the Federal Reserve control inflation by means of the costs of foreign goods? To me, much of economic theory surrounding the Federal Reserve seems antiquated... Born of the 1930's "Great Depression" (and before)... before which the US was (I am told) a net exporter, computers & the internet (and derived analysis) did not exist, and public information was scarce.

At some point (sooner-or-later) Federal Reserve Thinking (and economic thinking in general) is going to change radically (or growing economic pressures fill force change by means of the markets). I very much hope that thought and reason will dominate the change, not the brutality of the markets.

In the meantime, the economy awaits the next QE3'ish announcement, and the return of sanity to Government.




-Robry825

Monday Morning Economic Assessment

While investors and consumers fretted last week, the business sector got some feet as the US Industrial economy (if pipeline scheduling is correct) turned and advanced mildly, while consumption and the financial markets tumbled.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of 8 consecutive weekly declines, gaining slightly to 119.3 (vs last weeks 119.0). In its dailies, the measure started soft over last weekend then firmed on Monday..

The Consumption Index rose for its second week in a row, climbing to 146.5 (from last weeks 145.5). In its dailies the measure started the week firm then softened Monday-on.

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

Pattern-changes last Monday revolved around both the changeover to a new calender-month, and the US governmental budget-compromise.

The much-dreaded US-credit-downgrade occurring on Friday, though talked up in the press and rattling the markets in Sunday-night pre-trade, appeared to cause no significant changes as of yet in preliminary weekend gas-flow scheduling... we will wait to see if that holds up following Monday-night & Tuesday-night actuals on the weekend estimates.

Overall, breaking of the recent pattern of receding industrial activity is a positive, though it is temporarily outweighed by weakness in consumption. Apart from the last 8 weeks, it has been consumption that leads the economy, and consumption peaked in March.

The US economic "ball" appears to remain in the Federal Reserves end of the court. Where are you, QE3?



-Robry825

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) continued to backtrack last week, while consumer spending rebounded midweek and a divided US government strained to find compromise on its budgetary focus.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its eighth week in a row, dropping to 119.0 (vs last weeks 119.5), and is at its lowest point now since 12/07/10. In its dailies, the measure had a rather bland look...starting the week (last Saturday) with just a tad of firmness then resoftening Tuesday on.

The Consumption Index reversed its prior two-week decline, gaining to 145.5 (from last weeks 143.4). In its dailies the measure started the week soft then firmed abruptly Wednesday on.

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

Overall, the recent pattern of receding industrial activity (with all of its implied stress on employment numbers) remains intact but needs to be broken in order to avoid recession. Last weeks attempt at a rebound in consumption needs to echo into the industrial numbers, and we very much need to see consumption take back its initiative and lead production higher. Consumers look to be (at least momentarily) optimistic and likely not the problem. It is the defensiveness within the business/investment side that is the problem.

Key to rebuilding confidence short-term will be a last-minute compromise on the impending "Econo-geddon" in a couple days. The compromise (though upwardly portrayed) is a necessary cave to the status quo... with the borrowing & deficit spending frontloaded and the cost-cutting backloaded... where it can eventually be killed. Accountability (by means of a balanced budget amendment) has been effectively avoided.

As noted previously, I believe deficit-spending and government borrowing to be hard-wired into government by means of the constant drain of liquidity out of the US (by means of trade deficits) that (by way of the absence of Federal Reserve Replacement) has to be recycled back into the US... by the US government first re-borrowing those funds then deficit-spending them back to consumers... who repeat the process of buying foreign goods.

The whole of the US national debt represents that continual recycling ("spooling") of the US money supply back into the US economy, and that spooling cannot be broken without either (A) Killing the economy, (B) Going Protectionist, or (C) the Federal Reserve index the money supply to the trade deficit by some means (such as quantitative easing QE3, QE4, QE5, etc).

Further complicating the picture, the Government And Federal Reserve account for quantitative easing as a loan (Government borrowing from the Federal Reserve).

As such, the "Cave to the status quo" was likely unavoidable, and hard-wired in (though one has to wonder how many in government know their strings are being pulled in ways they don't want to go). Watching government the last few weeks was like watching a box full of rats all disparately looking for a way out... when there is no way out).

That is not to say that there is not antagonism against the compromise. There is a lot... and it is uncertain if the center will survive the anger of the extremes and the compromise actually pass. Who knows... we may yet test the waters of "Econo-geddon".

Another possible downside... should the compromise pass, and foreign interests like what they think they see, they may rally the dollar... further pumping the trade deficit and ramping up that governmental borrow-and-spend "spooling" of the US money supply back into the US economy.



-Robry825

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



***ROBRY-CALC UPDATE: For those using the Robry-Calc Spreadsheet... the software has been revised and I would encourage you to download the latest copy (http://robry825.com/). The update is free to anyone who previously downloaded and I want to encourage its use.

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)

New functionality includes Pivot tables, a PDF-option for saving workbooks, and new sorting/lookup flags within Match/Lookup-type functions. Also, text-sorting functionality has been greatly improved, including a "fast-sort" option for sorted text which may (for very large tables) be hundreds of times faster than previously.

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

Sunday Night Economic Assessment

The US Industrial economy continued to backtrack last week (if pipeline scheduling is correct), while consumer spending turned and (at least for the moment) showing a few signs of remaining life.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its third week in a row, dropping to 122.5 (vs last weeks 123.7). In its dailies (raw, non-seasonally adjusted flows) the week was choppy, though (as last week) ended with some weekend strength.

The Consumption Index conversely headed higher (its second weekly gain in a row), rising to 145.7 (from last weeks 143.2). In its dailies the measure had a nice reversal, starting very soft but firming sharply Wednesday-on

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

Again a little bit better last week in steel-group scheduling, which inched up its June '11 average up to .154 (though still off a bit from May (.153) and well off of the May '10 recovery high (.206). Food-group scheduling again bearishly gained and continues to hover at record heights for the measure.

The US economy retains its dead-in-the-water look, waiting for whatever change-in-momentum comes along first, whether for good or for bad.

Concern remains for the imminent end of the Federal Reserves QE2 (and lack of QE3 commitment), and for the ongoing budgeting & spending standoffs in government. Getting a budgeting compromise that reduces budget deficits without draining liquidity from consumers (and thus slowing already-stagnant consumer spending), and without draining liquidity from an already-defensive business community (further constraining capitol-formation and hiring) will be an impossible stunt. Unless they plug the import-liquidity drain in the bottom of the bathtub (or the Federal Reserve replace it), bailing water from one end of the tub to the other isn't going to achieve anything!



-Robry825

Sunday Night Economic Assessment

The US Industrial economy backtracked last week (if pipeline scheduling is correct), while consumer spending held at low levels.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its second week in a row, dropping to 123.7 (vs last weeks 124.2). In its dailies (raw, non-seasonally adjusted flows) the week began soft, strengthened slightly midweek, then ended soft.

The Consumption Index broke its 2-week string of losses and headed higher, gaining to 143.2 (from last weeks 137.5), mostly due to an extremely soft week falling off the end of its 28-day moving average. In its dailies the measure was choppy but generally soft throughout.

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

A little bit better again last week in steel-group scheduling, which inched up its June '11 average up to .152 (though still off a bit from May (.153) and well off of the May '10 recovery high (.206). Food-group scheduling bearishly gained and hovers at record heights for the measure.

The US economy can best be described (judging strictly by the gas-flows) as dead-in-the-water... neither advancing nor declining overall... waiting for the winds of overall direction to show and replace the dead-calm, stagnant air of status-quo. Increments in retail sales appear to be covering up for decrements in bigger-ticket "durable-goods" sales, as a worried populace awaits.

Concern remains for the imminent end of the Federal Reserves QE2 (and lack of QE3 commitment), and for the ongoing budgeting & spending standoffs in government.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy eased last week (if pipeline scheduling is correct), while consumer spending worked lower.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of four straight weekly record highs and headed lower last week, dropping to 124.2 (vs last weeks ). In its dailies (raw, non-seasonally adjusted flows) the week was soft throughout.

The Consumption Index eased for its second week in a row, falling to 137.5 (from last weeks 139.8). In its dailies the measure was choppy but generally soft.

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

A little bit better last week in some of the problem areas (Steel & Food) with steel-group scheduling inching up the June '11 average up to .149 (though still off a bit from May (.153) and well off of the May '10 recovery high (.206). Food-group scheduling (though a bit better than last week) still hovers at bearish heights.

Concern remains for the imminent end of the Federal Reserves QE2 (and lack of QE3 commitment), and for the ongoing budgeting & spending standoffs in government.



-Robry825

Wednesday Economic Updates and Corrections

Am (gladly) able to backtrack on yesterdays dire economics post. There was an error that overemphasized the drop off in industrial activity. While the economy is sluggish at present, it is no where near approaching that "point of no return" as feared within yesterdays post. A "corrected" commentary follows...

The US Industrial economy advanced meekly last week (if pipeline scheduling is correct), while consumer spending softened.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for the ninth time in the last ten weeks to 124.8 (vs last weeks revised 124.7). It was the fourth straight weekly record-high in a row for the index. In its dailies (raw, non-seasonally adjusted flows) the week started firm but weakened midweek. (In the last two days, the index declined to 124.6)

The Consumption Index reversed its recent short-term surge, slumping to 139.8 (from last weeks 144.9). In its dailies the measure was very strong early through the 31st, Then ratcheted down sharply June 1st on.. (In the last two days, the index declined to 137.3)

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

Steel-manufacturing scheduling dropped precipitously to start June (averaging .145 BCF/day, down from .153 in May and well below the recovery high of .206 in May of 2010). Steel-scheduling (though I haven't had a chance to roll it into these posts) is consistent with durable-goods orders, and its rapid-weakening had been a harbinger of recessions past.

Food-Group scheduling, which bearishly broke above previous-recession highs in April, also remains a worry. The Food group has a contra-relationship with consumption, and gains to the measure historically have tended to coincide with weakness in consumer spending.



-Robry825