January 28, 2014

Bloomberg’s Stilwell Really Wants to Blame the Disastrous Dec. Durable Goods Report on the Weather

There was another appearance of the dreaded U-word (“unexpectedly”) this morning at Bloomberg News.

The Commerce Department’s advance report on December durable goods orders and shipments showed a seasonally adjusted 4.3 percent decrease in orders from November, while November was revised down from a positive 3.4 percent to 2.6 percent. Economists’ median prediction for December was for a 1.8 percent increase. Bloomberg’s Victoria Stilwell had an excuse at the ready, and as will be seen, chose to use it even though she knew it was a stretch (bolds are mine throughout this post):

Orders for U.S. Durable Goods Unexpectedly Slump


Orders for durable goods unexpectedly slumped in December by the most in five months, reflecting a broad-based retreat that raises the risk business investment will cool in early 2014.

Bookings for goods meant to last at least three years dropped 4.3 percent, exceeding the weakest forecast of 82 economists surveyed by Bloomberg, after a 2.6 percent gain in November that was smaller than previously reported …

The figures are difficult to square with other reports that showed factories were contributing to economic growth at the end of 2013 and into this year as companies geared up to meet more demand. While the weakness is hard to pin on bad weather, the across-the-board nature of the declines is similar to the retreat shown in employment last month that some economists said was related to the dip in temperatures. [*]

The median estimate of economists surveyed by Bloomberg called for a 1.8 percent advance in total orders. Forecasts ranged from an increase of 10 percent to a 1.2 percent drop. The gain in November was revised from a previously reported 3.4 percent advance.

Excluding transportation equipment, where demand is often volatile month to month, orders decreased 1.6 percent, the biggest decline since March, after a 0.1 percent increase in November.

[*] — Translation: “I’m not going to concede that the report stinks without inventing an excuse to try to minimize the damage. So I’m going to use the same copout some reporters used to explain away December’s weak jobs numbers a few weeks ago.”

Nobody else, including the economists Stilwell quoted, the Associated Press, Reuters, and MarketWatch, cited the weather as a factor — and one would hope that the economists factor weather into their advance predictions.

Stilwell’s attempted weather copout contradicts the assessment in her opening paragraph (a “broad-based retreat that raises the risk business investment will cool in early 2014.”). It would be much better if she would just have relayed the facts and let readers decide what they mean, but the business press seems congenitally unable to resist doing what it has no business doing.

The AP’s Martin Crutsinger made two other attempts at creative excuse-making:

Some of the December weakness probably reflected a temporary dip following November’s big jump which had been driven by businesses rushing to take advantage of expiring tax breaks.

The December decline came as a surprise to economists. The consensus view among economists was that orders would post a moderate rise reflecting what they believe is an improving outlook for U.S. manufacturers.

Jennifer Lee, senior economist at BMO Capital Markets, said that a good portion of the decline in commercial aircraft orders resulted from the government’s seasonal adjustment process which trimmed a tripling in demand for airplanes that Boeing reported for the month.

As to November, it was revised down, Marty. The revised 2.6 percent isn’t that “big” of a jump, and the final two months of the year net out to a pretty negative -1.7 percent.

Crutsinger’s use of the seasonal adjustment excuse is odd on a number of levels. First, commercial aircraft orders make only about 8 percent of all orders. Second, every line item in the report except two showed a decrease in December orders. Beyond that, seasonally adjusted figures are normally considered so sacrosanct by the business press that their adjusted nature is often not even disclosed; indeed, Crutsinger’s opening paragraph didn’t describe today’s numbers as seasonally adjusted.

The fact is that we haven’t had normal “seasonality” in economic data for about six miserable years of the most mediocre “recovery” since World War II.

Cross-posted at NewsBusters.org.


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