This chart tells the story of what I'm seeing through other economic indicators being released now and in recent weeks. This is a chart of the past 10 years of Producer Price Indices, the general economic cost index for companies that produce things. If a steel cookware company wants to sell more cookware, it cares  a lot for example about the cost of steel. Same for a fast food company and the cost of fuel and agricultural goods.

As leading indicators go, this is one of my favorites. Markets have  no conscience. They have no politics (unless they're being manipulated illegally, i.e. Enron).  And so raw pricing is a nearly unadulterated data point. And in this case, it's not the cost at the check-out counter being measured, it's the pricing of the materials a company has to buy in order to sell it at the check-out counter. In this case, the "buyers" are the eventual end-sellers, and so their purchasing decisions indicate a sober analysis of what they need to meet predicted demand for their consumers.

Okay then. So just like with the CPI (Consumer Price Index), which is the end price of goods, the PPI has the same dynamic: low demand = low pricing and rising demand = higher pricing. While inflation is the bogey man of Wall Street, in an economic recovery, rising prices because of rising demand is a good thing. It's a great thing. And when we see that happening at the "producer" level, it parallels a clean indicator of business (aka "employer" in my analysis) confidence. While there are separate measures for employer and business confidence, they're much messier than raw pricing data. But raw pricing data isn't as sexy either, nor is it as easy to understand.

In this chart from Fed data, I selected the past 10 years of PPI general (blue line, under the purple), and those PPI components related to energy -- so we can get a story about Houston in particular.

Since 2000, we see a retelling of "the lost decade" narrative economically, told not just in this chart or in these data. Just eyeball 2001 and 2009.  But we also see why Houston is recovering so exceptionally right now, and why the recovery appears to be reliably sustainable. Look how the energy-related pricing, which indicates demand for the Houston industrial base, far exceeds the average PPP (blue line). Yes, they fell hard in 2008, but since the recovery began in 2009, look how the energy-specific producer prices  have outperformed other producer prices.

This out-performance of energy-related pricing at the producer level benefits Houston in particular, where the energy industry base resides for the nation. If the industrial sector is leading the nation in the recovery, which it is, then the energy sector is key to that leadership. In this chart, and this is just one of many part of a larger narrative of the current recovery, we see why Houston is perhaps the strongest city economically in the nation right now, and why it will continue to grow in coming years.

It's been said a picture is worth a thousand words. In this case, I think it's literally true...