May 15, 2014

AP Blames ‘(Good) Weather’ For April Decline in Industrial Production

It looks like the “weather” excuse the press went to repeatedly to explain weak economic results in December, and January, and February, and March still has life in April. But this time, warm weather (which most of us would find “good,” at least in April) is to blame. An early afternoon report (relevant portion saved here in graphic form) on the Dow’s 200-point mid-day dip by the Associated Press’s Ken Sweet claims that April’s reported decline in industrial production was “possibly due to more bad weather” (while this post was prepared, the AP issued a 2:17 p.m. update which still had the “bad weather” excuse.)

That “bad weather” line is odd, because an earlier AP dispatch by Paul Wiseman exclusively about today’s production release from the Federal Reserve didn’t mention or allude to the weather at all. After the jump, I’ll walk readers through Sweet’s possible “warm weather was really bad weather (for the economy)” logic and critique Wiseman’s longer coverage.

Here’s the relevant section of the Fed’s report today:


The only leg on which the AP’s Sweet can stand is to claim that April’s warm weather (which most of us would see as “good,” not “bad”) caused a decline in utility usage and therefore less production of energy. The trouble is, as seen above, every other category except mining either suffered a decline or went nowhere. The decline in utilities production could not have had a great degree of influence on the final outcome, or it would have come in far more negative than “only” -0.6 percent.

Wiseman’s coverage of the industrial production report had several weaknesses and convenient omissions (bolds and numbered tags are mine):


U.S. factory output took a breather in April [1] after two months of strong growth, as manufacturers produced less furniture, machinery and plastics.

The Federal Reserve said Thursday that factory production fell 0.4 percent from the previous month after rising a revised 0.7 percent in March and 1.5 percent in February. Manufacturing output has risen a solid 2.9 percent over the past year. [2]

The decline appears to be a temporary setback that doesn’t have economists too worried.

We are not concerned by the drop in industrial production, because it was likely a one-time event” given healthy signals from other recent measures of manufacturing, said economists at Deutsche Bank Securities in a note to clients.

The Institute for Supply Management, a group of purchasing managers, has reported that U.S. manufacturing grew faster in April than March. Its manufacturing index rose to 54.9 last month from 53.7 in March as exports rose and factories stepped up hiring. [3] Any reading above 50 signals growth.

The Commerce Department has said orders to U.S. factories for long-lasting manufactured goods showed decent gains in February and March.

Overall industrial output, which includes manufacturing, mining and utilities, fell 0.6 percent in April, the Fed said. Output at utilities plunged 5.3 percent; households used less heat as temperatures rose.

… The economy is picking up momentum after stalling during the nasty winter. The economy expanded at an annual pace of 0.1 percent from January through March. [4] Economists expect the pace to pick up to 3 percent or faster this quarter and for the rest of the year.


[1] — Economies don’t take “breathers” — and even if they did, a decline is not a “breather.”

[2] — It’s reasonable to question why Wiseman concentrated only on factory output, which is just one component of industrial production. Is it because the number (-0.4 percent) wasn’t quite as negative as the overall result of -0.6 percent?

[3] — The ISM indices, while usually very useful, are surveys of sentiment and general direction, and are not supported by hard numbers. It is very possible for sentiment to be fairly positive and for the economy to be going nowhere. A perfect example is this year’s first quarter. The economy at best grew imperceptibly and more than likely contracted (see [4] below), yet every single ISM index number during the quarter came in above the 50.o breakeven point for expansion.

[4] — How convenient that Wiseman chose to avoid telling readers that there is now a broad consensus, as the Wall Street Journal reported on Tuesday, that the May revision to the economy’s first-quarter GDP result will go negative:

Incorporating the new data (on retail sales and business inventories), J.P. Morgan Chase on Tuesday estimated GDP contracted at a 0.8% rate in the first quarter. Macroeconomic Advisers put the contraction at 0.7%. Barclays Capital predicted a 0.6% decline. Pierpont Securities estimated output fell at a 0.4% rate. Action Economics estimated a 0.2% decline.

Readers expecting an appearance of the U-word appeared in today’s reporting on the industrial production decline won’t be disappointed. Here’s Bloomberg: “Industrial Production in the U.S. Unexpectedly Fell in April.”

Cross-posted at


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