Short-Term Key: Negative Long-Term Key: -93 (Neutral to Negative)
The two most important developments that came to light this past weekend both occurred within the energy sector, a sector which is also a key indicator of economic health.
On the global level, we had a report that oil consumption in the U.S. fell in January to its lowest level since 1998. We can interpret this drop in several ways.
Most of the recent decline came in the demand for distillates, including diesel fuel. Diesel fuel, which is used in trucking, railways, and other forms of mass transit, is particularly sensitive to economic activity. The more goods we produce, the more transportation fuel gets consumed and vice versa. In fact, UCLA has recently created a Pulse of Commerce Index based on real-time diesel consumption by the American trucking industry.
Diesel consumption has a very good record as an indicator of industrial production. Unfortunately, this means the drop in January's consumption figures suggests that industrial output is slowing as well.
To be fair, the 3-month moving average for this index is considered more reliable than the monthly data, and the 3-month MA is up. December saw a big increase in consumption, so perhaps January's dip is really just a brief correction. Nonetheless, another drop in February would call the U.S. economic recovery into question.Read more...
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