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



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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