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
