Industrial Production Data Presents A Head Scratching Anomaly- Decreasing Electricity Use

Print Friendly

The permanent chart page on Industrial Production is updated when new data becomes available. You can bookmark that page for future reference. It’s content is reproduced here.  

Industrial Production was reported to have gained 0.6% in July on a seasonally adjusted basis, matching the consensus estimate. This was one of those rare occasions where the conomists guessed right.  However, that’s not the same as saying the seasonally finagled number is accurate, or accurately represents the trend. It may or may not at any given time.

The actual, not seasonally adjusted number was down 2%. July is always a down month and this reading is a little better than average for this month but not as good as the past two years.  It was down just 1.4% in July 2011 and 1.6% in July 2010.  The average July change over the past 10 years was -2.8%.

The total index is smack on trend.

With Europe in a monster meltdown and China slowing, this number was actually quite good. That’s because the US, as the Last Ponzi Game economy standing, is benefiting from all the turmoil in, and capital flight from, Europe. Panicked, wealthy European individuals and institutions buy US Treasuries. The following week the Treasury spends that money, and voila, it shows up in US industrial production.

The Fed, Industrial Production and Stock Prices - Click to enlarge

The Fed, Industrial Production and Stock Prices  - Click to enlarge

Stock prices had been heading toward an overbought level relative to industrial projection, but that stopped in 2011. The ratio of the S&P 500 to the Industrial Production Index has turned flat in response to the Fed holding the SOMA flat for the past year. Stocks may not be expensive relative to the economic data, but they’re not cheap either. If they should run to reach the 2007 highs from here, a gain of around 10%, they would be approaching a historical extreme, but if industrial production continues to expand at the current pace, there would be room for stocks to reach new highs.

Get the full story on the technical outlook for stocks daily with a 30 day risk free trial to the Professional Edition Daily Market update.

See The Conomy Game- The Legend of Bennie The Beard, Henry the Hitman, and the Gangbankster Dealers


Electric Power Generation and Distribution

Electric Power Generation - Click to enlarge

Electric Power Generation – Click to enlarge

I like this indicator because it is a measure that covers everything, not just manufacturing. I can’t think of too many businesses that don’t need electricity to run. When business is bad, electricity consumption falls and vice versa. In addition, when times are bad, people at home turn the lights out and turn the air conditioning thermostat up a degree or two.  When people feel good about their economic prospects, what the hell, leave the lights on and turn the a/c down full blast.

The long term view of this indicator says that the economy has done nothing. The year to year data shows a decline of 1.9% from last July. The 12 month moving average is also slightly declining. This suggests that in total, the economy is not expanding.  Other economic indicators reflect slow growth. Can an economy grow without increasing electricity use? Something is out of whack. Place your bets accordingly.

Other Economic Charts 

 

Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and begin your risk free trial NOW!

 on Twitter for real time market commentary and news updates that are relevant to you!

Spread it!Tweet about this on TwitterShare on FacebookShare on LinkedInEmail this to someonePrint this page

Keep track of the insanity of the Fed, Primary Dealers, the US Treasury, other central banks and a whole cast of nefarious characters as they drive markets in the Wall Street Examiner Professional Edition Fed Report and Treasury update. Try the Professional Edition risk free for 30 days!