The US Industrial economy continued to ease last week (if pipeline scheduling is correct), while consumer spending surged.The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) had its third decline in a row, easing to 121.2 (vs last weeks 121.9). In its dailies (raw, non-seasonally adjusted flows) the week had a soft-to-flat look throughout.
Different story on the consumption side, with the Consumption Index surging to a record high (its fourth weekly gain in a row), gaining to 150.6 (from last weeks 147.1). In its dailies the week started soft in its raw (non-seasonally adjusted) numbers then took off starting on Monday and especially Tuesday.
The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) again continued in its long-term decline.
Overall, the recovery continues to appear strongly supported by elevated consumer-spending, an uncharacteristically-large lead in the Consumption Index over the Production Index, and continuing declines in the Inventories measure.
I suspect first-quarter results (due out starting in about 3 weeks) are going to be exceptionally strong, as large gaps (in the past) of consumption over production have generally been consistent (in the modeling) with large jumps in profitability. And that gap is widening near the end of the quarter... probably to add to optimism as CEO's prepare their comments toward the 2nd quarter.
There is a "teeter-totter" like effect behind all this (and those following this blog for some time have undoubtedly picked up on this) in that the Production Index often moves conversely to the direction of the Consumption Index, and I have postulated in the past that those "converse" moves are often politically-driven... with positive effects to the Productive end of US society (and negative effects to the Consumptive end of US society) when Republicans (perceived as representing business & investor interests) get their way...and positive effects to the Consumptive end of US society (and negative effects to the Productive end of US society) when Democrats (perceived as representing consumer interests) get their way.
We are now in a phase (have been the past 3 weeks) where that teeter-totter is strongly tipped in the consumers direction (thanks also both to accommodative Federal Reserve policy and stimulative governmental policy), which is consistent with good corporate profitability. (the direction of the "fulcrum" (mid-point) of that "teeter-totter" would also strongly consistent with economic direction in past data).
Also consistent in past data when the economic "teeter-totter" gets tipped strongly in the consumers direction (as it is today) is a bit of inflationary pressure and commodity-bullishness... which we are also seeing a little bit of in here too.
-Robry825
