October 15, 2013

AP’s Rugaber: Manufacturing Report Which ‘Held Steady’ Means ‘Shutdown May Be Weighing on the Economy’

Apparently desperate to claim that 17 percent government shutdown is causing pain, Christopher Rugaber at the Associated Press, aka the Adminstration’s Press, decided that the Empire State Manufacturing Index’s decline from brisk expansion to modest expansion was “a sign that the partial government shutdown may be weighing on the economy.” Rugaber wrote what he did despite the actual report’s emphasis that both business and labor market conditions “held steady,” and its accompanying observation that manufacturers’ borrowing costs have increased.

Though the headline at the AP’s national site is a neutral “NY FACTORY ACTIVITY GROWS MORE SLOWLY IN OCTOBER,” the one accompanying the story at some outlets (e.g., here and here — “Survey shows NY factory activity grows more slowly in October, signaling shutdown impact”) is not. The four-paragraph story, presented in full for future reference, fair use and discussion purposes, follows the jump:


Let’s compare what Rugaber wrote to the Empire State report’s published overview (bolds are mine):

The October 2013 Empire State Manufacturing Survey indicates that business conditions held steady for New York manufacturers. The general business conditions index fell 5 points to 1.5. The new orders index rose five points to 7.8 and the shipments index fell three points to 13.1, suggesting that both orders and shipments increased modestly over the month. The prices paid index was unchanged at 21.7 and the prices received index fell six points to 2.4. Labor market conditions were also steady, with the index for number of employees falling four points to 3.6 and the average workweek index inching up to 3.6. Indexes for the six-month outlook continued to convey a strong degree of optimism about future business conditions.

Supplementary questions focused on recent and expected changes in firms’ borrowing needs and credit availability. Parallel questions had been asked in October 2012 and in earlier surveys. As in earlier surveys, a majority of respondents to the current survey reported no change in borrowing needs—both over the past year and over the past three months. Queried about changes in credit availability, again, the vast majority of respondents reported no change—both over the past three months and over the past twelve months. In contrast with last year’s survey, firms in this month’s survey reported increased borrowing costs, on net, over the past three months. Earlier surveys indicated net declines in borrowing costs. For more details, see the full supplemental report.

More »

Business Conditions Hold Steady

Business conditions held steady, according to the October survey. On the heels of four consecutive months during which the general business conditions index indicated that activity grew modestly, the index fell 5 points to 1.5, suggesting that conditions were little changed over the month. Roughly a quarter of respondents indicated that conditions improved, and about the same share reported that conditions worsened. The new orders index moved in the opposite direction, rising 5 points to 7.8, indicating that orders increased modestly. The shipments index fell 3 points, but at 13.1 it pointed to a modest increase in shipments. The unfilled orders index was little changed at -6.0. The delivery time index fell 7 points to -10.8, pointing to shorter delivery times, and the inventories index came in at zero, suggesting that inventory levels were unchanged.

Labor Market Conditions Also Steady

Labor market conditions also held steady. The index for number of employees fell for a second consecutive month, but was slightly positive at 3.6. The average workweek index also held above zero, at 3.6. Price indexes pointed to a steady pace of input price increases and little change in selling prices. The prices paid index was unchanged at 21.7 and the prices received index fell 6 points to 2.4.

Six-Month Outlook Remains Favorable

Indexes for the six-month outlook generally conveyed strong optimism about future business conditions. The future general business conditions index held near last month’s year-and-a-half high, at 40.8. The indexes for expected new orders and expected shipments also remained at strong levels. The future prices paid index rose 6 points to 45.8 and the future prices received index held steady at 25.3. Future employment indexes indicated an expectation that employment levels and hours worked would be somewhat higher in the months ahead. Finally, the capital expenditures index and technology spending index were little changed, at 15.7 and 12.1, respectively.

The report’s “About” page indicates that “The survey is sent on the first day of each month to the same pool of about 200 manufacturing executives in New York State, typically the president or CEO.” It also says that responses are accepted until the 15th. But in a brief conservation this morning, Rich Dietz at the New York Fed indicated that the survey really has a hard monthly deadline of either the 10th or the first business day after the 10th.

Rugaber didn’t write a single word about higher borrowing costs. If anything is responsible for toning down the Empire State’s manufacturing expansion, it would be an increase in hard-dollar interest costs.

It should be obvious that the relationship between a 17 percent government shutdown and the pace of manufacturing in the state of New York is tenuous at best. But not to Rugaber or the AP, whose reporters insist on trying to interpret — or misinterpret — anything they possibly can through a Washington-centric lens.

Cross-posted at NewsBusters.org.



  1. Related article that may shed some light on Obama’s motivations to shutdown the government in an all or nothing play:

    How Much Would a Federal Default Affect the U.S. Economy?


    If played out through the remaining 78 days of 2013, assuming we stick with President Obama’s planned schedule for putting the U.S. federal government into default, that would reduce the nation’s GDP for the fourth quarter of 2013 by $168.48 billion.

    To put that number into perspective, the fiscal drag produced by the $56.3 billion by which U.S. federal taxes will be higher in the fourth quarter of 2013 than they were in the fourth quarter of 2012 thanks to President Obama’s tax hikes that took effect back in January 2013, GDP in the U.S. will be nearly $168.92 billion smaller in 2013-Q4 than it would otherwise have been given the GDP multiplier for taxes.

    Why, that’s almost exactly the same amount! Perhaps that explains why President Obama has been so intent on doubling down on his “no negotiation with the duly elected representatives of American citizens” strategy – he’ll produce twice the negative fiscal drag on the U.S. economy in 2013-Q4 if only he and his supporters can stick with it!

    Obama knows a recession is coming due to his first set of tax increases and wants to blame it on the GOP. What better way to cover up a developing disaster but with an immediately produced disaster? This then covers up the second set of tax increases due to start in 2014 from ObamaCare.

    I would like to put this in perspective that I don’t quite agree with the analysis here given that every penny of government dollars that would NOT be spent during a so called “default” is faux money pulled out of thin air by the Federal Reserve buying US Treasury Bonds. I agree that increasing taxes is a drag on the economy as money that would have been spent or saved in the private sector is being diverted to incompetent government spending on the most immediate level. As we all should know by now, the Fed has been buying all the US debt issued for a few years now at the tune of $85 billion a month which is equal to the annual budget deficit.

    As a side note and reminder: These purchases have been largely via straw buyers (the banks) whom the Fed lent money to in order to make the initial purchase using phony accounting gimmicks to claim their Fed loan is actually an asset on their balance sheets. Thus making money off the spread between the Fed loan interest and the US bond interest as their profit margin to be the straw buyer for the Fed. Where did the Federal Reserve get this $85 billion a month? Electronic ones and zeros wired from their computer terminal to the US Treasury. The truth is the Fed has been money printing without the physical printing for years now to the tune of $1 trillion a year.

    The real effect that has been covered up here is the slow motion humanitarian disaster leveled against the poor and the middle class via food and fuel price inflation, not just here in the US but worldwide. The reason for this effect is that printing money or more accurately expanding the supply of money without prior real increase in GDP is actually a stealth tax on every dollar by means of dilution. If wealth is not being created (making the pie bigger) in the private sector any increase in the money supply is a dilution of the pie into smaller and smaller increments. The GDP by everyone’s admission has NOT grown by $5 or $6 trillion dollars over the past 5 years. But the Fed has injected that amount via US Treasury Bond purchases. If the Dollar is just a place holder then you can’t create more holders than there are places to hold them otherwise inflation is a result.

    Just because the government has played cute with numbers regarding the GDP calculation (deflator) doesn’t discount the actual effect. If a tree falls in the forest and no one is around to hear it does it make a sound? If the Fed wires ones and zeros buying bonds, isn’t there more money in the system than before even though the public has been actively deceived to believe not.

    Comment by dscott — October 15, 2013 @ 12:05 pm

  2. Former Obama Defense Secretary Leon Panetta Criticizes Obama’s Handling of Shutdown, Liberal Reporters In Attendance Spring To Dear Leader’s Defense…


    The money quote gaffe by the MSM which everyone is studiously avoiding:

    “Jackie Calmes of The New York Times noted that the Panetta-envisioned budget deal was illusory because Republicans refuse to consider new tax revenue.

    Obama got a tax increase in January 2013 and a scheduled one upcoming in 2014 under ObamaCare, and now he wants to increase taxes some more (third time)????? And Obama has shut down the government because the GOP refuses… another tax increase???

    Uhm, Tom, now that should be the lead story on every publication in the world.

    Comment by dscott — October 15, 2013 @ 12:42 pm

  3. Wow, it’s never enough.

    I understand that Obama has rejected a deal which was strictly cooked up by the Dem-dominated Senate.

    So much for it being the GOP House’s fault.

    Comment by Tom — October 15, 2013 @ 12:47 pm

  4. #3, which brings us back to Obama’s motivation. I don’t want to be right about this but it looks more and more like a high stakes gamble that the PR will stick to blame the GOP for a new recession. We know that there can’t be a technical default because there is enough monthly tax revenue to pay for bond interest and roll over. So we know that default is just hype to pressure the GOP and frighten the world markets. This is the Sequester all over and I hope that the GOP has the brass to ride this one through.

    My black helicopter theory on this is Obama is deliberately pushing us into Oct 17th severe down funding (not default) of a 25% hair cut on federal spending in order to declare a fiscal emergency which might be used as a pretext to dispense with any kind of budget at all. Then Obama as the executive in charge of spending funds would direct the government agencies to carry on business as usual under his priorities sans Congress. In effect, a coup de tat, removing one branch of government from power all together. This leaves the Executive and the Judicial branches. When the SCOTUS rules against him, he pulls an Andrew Jackson on them ala the Cherokee Nation vs Georgia ruling telling them to enforce their own judgment. I have to wonder if that’s why he acted the way he did when Honduras’s POTUS was arrested and sent packing???

    Comment by dscott — October 15, 2013 @ 1:14 pm



    I also noted here that Moody’s–which certainly ought to know–agrees that there is zero chance of default on Treasury bonds. In recent days, many more commentators have made the same point. The government is legally obligated to recognize its debt obligations, and the existing $17 trillion debt can be serviced on less than ten percent of federal revenue. So there simply can’t be a default…

    …The federal government can service its existing debt–i.e., pay the interest–on less than 10% of revenues. And it can renew the principal amount of that debt, $17 trillion, forever, simply by rolling it over. When the government issues new bonds to pay the principal on old ones that mature, there is no net increase in federal debt. So the AP’s claim that bond principal payments are somehow endangered–i.e., that default could occur–is sheer ignorance…

    …Companies are piling up cash for a number of reasons that relate in large part to lack of confidence in the Obama administration. Much of that cash was earned overseas but cannot be repatriated because of perverse double-taxation tax laws that the Democrats refuse to change. Further, cash is being stockpiled because companies don’t dare hire workers on account of Obamacare, and are waiting to see what blows the Obama administration still has in store for the economy…

    Please also note that interest rates cannot go up either even IF the debt ceiling is not raised UNLESS the Fed decides it should be raised as the Fed is the ONLY net buyer of US Bonds. At $85 billion month in Fed purchases of US Bonds, the US Treasury has no fear of unloading bonds even at near zero percent interest because there is no competition for bond buyers. If the Fed weren’t buying, then market dynamics would set an honest value for the interest rate. We don’t have an open capital market trading system anymore with the Fed being the principle buyer of US Bonds since there is no signal from the market via resistance to price them.

    Comment by dscott — October 15, 2013 @ 2:11 pm

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