Sunday Night Economic Assessment

Finally an up week for the US Industrial economy (if pipeline scheduling is correct), as industrial production turned and worked higher, while consumer spending (though declining for the week) showed signs of a rebound late.

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 and advanced to 117.7 (from last weeks 117.4). In its dailies the week started modestly then strengthened as the week progressed.

The paperboard-based Consumption Index dipped for its second week in a row, dropping to 123.9 (from last weeks 124.1). In its dailies the measure started soft but firmed throughout the week, and looked very strong in this weekends preliminary scheduling (should that scheduling hold).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) once again declined, though the momentum within its decline has definately slowed.

Last week was a very important week and was to be watched closely as it marked both the beginning of a new month and the beginning of a new quarter. Big changes within the gas flows tend to like to happen at such transitory points between months or quarters, as factories & retailers adjust to changing trends in orders and inventories in their scheduling of production and purchases for the upcoming new month or quarter.

Last week did not disappoint, as good things seemed to occur within the dailies of both the Consumption Index and Production Index. We will hope it is not some aberration related to the July 4th holiday weekend as the support underpinning the recovery (the indicated excess of consumption over production) has deteriorated sharply in recent weeks... threatening recovery.

With high levels of stress within the business & investing sector of US society (implied by the ongoing lag of production to consumption and the decline of the inventories measure) the burden of recovery continues to be laid fully (as always) on the consumer.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy continued its recent pace of slow back-tracking last week (if pipeline scheduling is correct), as both industrial production and consumer spending both eased again.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) eased for its fourth week in a row, slipping to 117.4 (from last weeks 117.8). In its dailies the week started firm but softened as the week progressed.

The paperboard-based Consumption Index also slipped, dropping to 123.9 (from last weeks 124.1). In its dailies the measure looked soft all week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to show signs of slowing the momentum of its long-term decline.

The economy still retains its appearance of being narrowly supported by consumer spending (with the deficit of the Production Index to the Consumption Index), though that support continues to be chipped away at the level of consumption. Stress within the investor/business sector of US society continues to be suggested in the ongoing lag of production to consumption and the decline of the inventories measure.

This upcoming week will be one to watch for changes as Tuesday marks both the beginning of a new month and the beginning of a new quarter. Gas flows tend to like to change around such days, as factories & retailers adjust to changing trends in orders and inventories in their scheduling of production and purchases for the upcomming new month or quarter.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy (after a very good month of May) appeared to continue its June softness (if pipeline scheduling is correct), as industrial production and consumer spending both backtracked.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) eased for its third week in a row, slipping to 117.8 (from last weeks 118.8). In its dailies the week started soft but firmed up as the week progressed.

The paperboard-based Consumption Index also slipped, dropping to 124.1 (from last weeks 127.5). In its dailies the measure looked soft all week.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to show signs of slowing the momentum of its long-term decline.

The economy still retains its appearance of being supported by consumer spending (with the deficit of the Production Index to the Consumption Index), though that support continues to be chipped away at the level of consumption. Stress within the investor/business sector of US society continues to be suggested in the ongoing lag of production to consumption and the decline of the inventories measure.

I continue to worry that strong foreign demand for dollars right now that is draining money out of the US (not to mention the ongoing trade deficits draining money out of the US) is a grave risk to the US economy. I suspect the Federal Reserve would do very well with another round of quantitative easing (purchasing of treasury debt). US dollar looks too strong for the good of the US economy.

Absent that, should the markets not find a way to reverse the dollar, and consumption decides to undercut production, we could see a catch-22 style contraction (as we had last fall) should businesses choose not to let inventory build and start laying off instead... scaring consumers to spend less... scaring businesses to scale back and lay off... scaring consumers to spend less... scaring businesses to scale back and lay off... and on and on into a deflationary spiral.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy appears to have taken a vacation (along with Robry) over the past two weeks (if pipeline scheduling is correct), as industrial production eased slightly while consumer spending hang supportively above.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its prior string of four record highs in a row, dipping to 118.8 (from last weeks 119.7 and the prior weeks 120.2). In its dailies it had its third of three consecutive soft week in a row.

The paperboard-based Consumption Index meandered to 127.5 (from last weeks 127.0 and the prior weeks 127.1).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued to show signs of slowing the momentum of its long-term decline.

The economy appears to remain somewhat supported by consumer spending with the deficit of the Production Index to the Consumption Index. Stress within the investor/business sector of US society continues to be suggested in the ongoing lag of production to consumption and the decline of the inventories measure.

I continue to worry that strong foreign demand for dollars right now that is draining money out of the US (not to mention the ongoing trade deficits draining money out of the US) is a grave risk to the US economy.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy continued to advance last week (if pipeline scheduling is correct), closing in a bit more on consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) racked up its fourth record high in as many weeks, rising to 120.2 from the prior weeks 119.2. In its dailies the week started firm but faded (as per seasonal expectations) early on in approach to the Memorial-Day holiday weekend. The Month of May continues to look especially impressive with its surge given that May tends to be the weakest month of the year.

The paperboard-based Consumption Index however bucked the trend (breaking a string of five up weeks in a row), falling to 127.1 (from the previous weeks 131.7).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its long-term decline, though the decline looks to be slowing in momentum the past few weeks.

For the time being, the economy appears to remain supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the continuing decline of the Inventories Measure continuing to affirm the economic recovery.

However, with the Production Index now starting to get closer to the Consumption Index, we are approaching a point where the impetus of the expansion (week as it is employment-wise) could get challenged. While we are not there quite yet (the indexes would have to cross) we could loose momentum quickly if they do cross and double-dip, given the shallowness of the recovery at the investment/business end of the economy.

Now this is speculative on my part... but from looking at the flows, the strength of the US dollar, and the news from Europe... I get a sense that there is strong foreign demand for dollars right now that Is draining money out of the US (not to mention the ongoing trade deficits draining money out of the US)... and wonder if another round of strong quantitative easing by the FED is in order.



ROBRY VACATION NOTE... There will likely be no Sunday night post next weekend as my family and I are headed off on vacation for a week (anticipate returning on Monday, June 7th. Depending on how well the computer automation performs, I hope to do a midweek economic post probably Tuesday or Wednesday night.



-Robry825

Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), chasing strengthening consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) racked up its third record high in as many weeks, rising to 119.2 from the prior weeks 117.3. In its dailies the week appeared robust from start to finish. Mays surge continues to look especially good given that May tends to be the weakest month of the year.

The paperboard-based Consumption Index also continued higher (its fifth up-week in a row), rising to 131.7 (from the previous weeks 129.6).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its long-term decline, though the decline looks to be slowing in momentum the past few weeks.

It is strange watching the disconnect the past few weeks between the economically-indicative gas flows vs the markets, with the sharp contrast between the implied surge in the economy vs the pessimism in the markets. One has to wonder if the markets are reflecting April gas-flow weaknesses (as being recognized now?), reflecting European concerns (bear trap to set up a summer rally?), or perhaps looking ahead to discount fall mid-term elections (discounting the loss of unilateral Democratic rule as a depressant to Democratic consumers?) or other troubles.

For the time being, the economy appears to remain well supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the continuing decline of the Inventories Measure continuing to affirm the economic recovery.

However, it still appears to continue as a jobless-recovery, as the lag in the Production Index (vs the Consumption Index) and the softness in the Inventories Measure continues to imply a shallowness in the productive end of the US economy... which suggests a continuing defensiveness in industry toward aggressively hiring to chase market share or pursue new ventures.



-Robry825

Sunday Night Economic Assessment

Forget all the gloom in the markets these past few days, the US economy is surging! (according to pipeline scheduling) as Industrial production continues to chase consumer spending higher.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) achieved its second record high in as many weeks (rising to 117.3 from the prior weeks record 115.4). In its dailies the week started moderately (in weekend scheduling) but firmed as the week progressed. The week looked especially good against seasonals as May tends to be the weakest month of the year.

The paperboard-based Consumption Index also worked higher (its fourth up-week in a row), rising to 129.6 (from the previous weeks 128.3).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) continued its long-term decline, though the decline looks to be slowing in momentum the past few weeks.

It has been a fascinating flip from implied April-weakness to May-strength, both in terms of industrial production and consumption, and the flip is very noticeable in the "Part 8" sector breakdowns (on the Investor-Village CWEI Board). For instance the Metals/Steel groups were pressured in April but strong in May (Aluminum is surging this month so far).

The Food Group is also very suggestive on this... April was the highest (52.5 mmcf/day) in fourteen months (Food is a contra indicator... tends to rise when consumers are stressed), while May is looking much better at a lower 47.5 mmcf/day.

Why the April-May Flip? I haven't a clue! Would greatly appreciate anyone else's views as to possible reasons but I am in the dark in my thinking as to possible catalysts.

Overall, the economy appears to remain well supported by consumer spending (consumer spending is the leash that leads the dog of the economy), with the deficit of the Production Index to the Consumption Index, and the continuing decline of the Inventories Measure continuing to affirm the economic recovery.

However, it still appears to continue as a jobless-recovery, as the lag in the Production Index (vs the Consumption Index) and the softness in the Inventories Measure continues to imply a shallowness in the productive end of the US economy... which suggests a continuing defensiveness in industry toward aggressively hiring to chase market share or pursue new ventures.




-Robry825