January 28, 2016

AP Reporters Cite the Same Expert — and Only That Expert — For Comments on Thursday’s Governments Reports on the Economy

The Associated Press may be down to one person in the whole wide world who will tell its economics reporters what they want to hear when the federal government releases economic data. That’s what you almost have to conclude after reading the wire service’s reports on two of Thursday’s major releases, namely last week’s initial unemployment claims and December’s durable goods orders and shipments.

The only outside source AP reporters Christopher Rugaber and Martin Crutsinger consulted in their respective reports about initial claims and durables was one Ian Shepherdson, chief economist with Pantheon Macroeconomics. Naturally, Sheperdson was sunnyside-up despite relatively troubling news in each area.


Dec. Durable Goods Bloodbath: SA Orders Down 5.1 Pct., Shipments Down 2.2 Pct., Inventories UP 0.5 Pct.(!); How Close to Zero (Or Worse) Will 4Q15 GDP Go? (But See Updates)

Filed under: Economy,Taxes & Government — Tom @ 9:30 am

Today’s brutal durable goods report should have the GDP prognosticators busy at their keyboards figuring out how much they need to reduce their projections of both fourth quarter 2015 and first quarter 2016 growth. Given that most of the predictions are already between 0.1 percent and 1.0 percent, one has to wonder how close to a goose egg the government’s advance GDP percentage will be tomorrow — or if it might even go negative.

From the Census Bureau:

New orders for manufactured durable goods in December decreased $12.0 billion or 5.1 percent to $225.4 billion, the U.S. Census Bureau announced today. This decrease, down four of the last five months, followed a 0.5 percent November decrease. Excluding transportation, new orders decreased 1.2 percent. Excluding defense, new orders decreased 2.9 percent.

Shipments of manufactured durable goods in December, down two of the last three months, decreased $5.4 billion, or 2.2 percent, to $235.8 billion. This followed a 0.6 percent November increase.

Inventories of manufactured durable goods in December, up following five consecutive monthly decreases, increased $2.1 billion, or 0.5 percent, to $397.9 billion. This followed a 0.2 percent November decrease.

Predictions for orders were between -0.5 percent and -1.0 percent.

Making matters worse, November’s original values for new orders, shipments, and unfilled orders were all revised down, while inventories were revised up. Orders went from flat to -0.5 percent.

Year-over-year, December 2015 compared to December 2014 (not seasonally adjusted, pending future revisions to Dec. 2015) was just awful:

  • Orders — down 1.7 percent.
  • Shipments — down 3.3 percent.
  • Unfilled Orders — down 1.9 percent.
  • Inventories — down 0.1 percent.

Comparative annual totals were also unimpressive (pending future revisions to Dec. 2015):

  • Orders — Down 3.5 percent in 2015.
  • Shipments — Up 1.4 percent in 2015.

And remember, even if tomorrow’s GDP percentage comes in positive:

  • December’s figures are subject to revision, and the trend for them in recent months has been decidedly downward.
  • Revisions to December’s retail sales, international trade, and several other areas are also on the horizon.

The likelihood that final fourth-quarter GDP will be positive has gone down significantly.


UPDATE, 12:15 p.m.: Well, maybe not, but I don’t understand why.

The Atlanta Fed has increased its fourth-quarter 2015 prediction to an annualized 1.0 percent from 0.7 percent, citing “The forecast for fourth-quarter real residential investment growth, currently 3.4 percent, increased more than 4 percentage points after last Friday’s existing home sales report from the National Association of Realtors.”

Excuse me, but that’s bizarre. Existing home sales are asset swaps, which except for giving rise to relatively small (in the grand scheme of things) realtor commissions and fees to bankers and others, don’t produce value. We’ll have to see if the residential investment growth figure really goes that high (the Atlant Fed now expects 7 percent to 8 percent) in tomorrow’s advance report.

Also, the Atlanta Fed didn’t comment at all on the durable goods disaster, which affected both November and December. That’s also bizarre.

UPDATE 2, 12:30 p.m.: Meanwhile, Moody’s, whose estimate almost always trails the Atlanta Fed and is generally overoptimistic, is now carrying a lower prediction, with the usual Mark Zandi-inspired “nothing to see here, move along” qualifier —

Fourth quarter U.S. GDP growth appears to have fallen short of 1%, but we caution against reading too much into the weakness. Inventories will be a sizable drag on growth in the final three months of the year and while painful for GDP, it’s necessary. …

… We look for fourth quarter GDP growth of 0.8% at an annual rate, with inventories shaving 1.3 percentage point off growth. Therefore, real final sales should have risen 2.1% at an annual rate, nothing spectacular but far from raising any red flags about the health of the domestic economy.

For heaven’s sake, the need to pull back from unsustainable inventory build, which is not happening nearly as fast as it needs to in light of the consistent monthly orders and sales declines, is the flippin’ red flag. They need to come down a lot, and stay there until conditions on the ground generally improve.

UPDATE 3, 12:40 p.m.: Pending home sales only increased by 0.1 percent in December (vs. expectations of +0.8 percent), and November’s pullback went from -0.9 percent to -1.1 percent. That probably doesn’t affect fourth-quarter GDP reported tomorrow, but it may presage downward revisions by the time the government releases its third version in late March. It also doesn’t bode well for 1Q16.

Initial Unemployment Claims (012816): 278K SA; Raw Claims (297K) 5 Pct. HIGHER Than Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 9:03 am

From the Department of Laborfor the first time in a long time during a truly comparable full business week (the MLK holiday which occurred during both the past week and the same week last year doesn’t really change that), year-over-year raw claims increased, and they did so substantially:


In the week ending January 23, the advance figure for seasonally adjusted initial claims was 278,000, a decrease of 16,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 293,000 to 294,000. The 4-week moving average was 283,000, a decrease of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 285,000 to 285,250.


The advance number of actual initial claims under state programs, unadjusted, totaled 296,817 in the week ending January 23, a decrease of 81,930 (or -21.6 percent) from the previous week. The seasonal factors had expected a decrease of 64,643 (or -17.1 percent) from the previous week. There were 281,885 initial claims in the comparable week in 2015.

The seasonal adjustment factors are pretty close (106.9 this year; 105.6 for the same week last year), but if last year’s factor had been used on this year’s raw claims, seasonally adjusted claims would have come in at 281,000 (296,817 divided by 1.056 is 281K, rounded).

Zero Hedge notes that the 4-week average has increased significantly during the past three months, and is now at a 10-month high. That will likely continue if weekly year-over-year raw claims continue showing increases.

Thursday Off-Topic (Moderated) Open Thread (012816)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

Positivity: Military Wife Expresses Heartfelt Gratitude to Furnace Repair Man

Filed under: Positivity,US & Allied Military — Tom @ 5:55 am

From Greater Pittsburgh (HT Daryn Kagan):

Jan 24, 2016, 4:05 PM ET

… A mother of two boys was touched by a selfless act of kindness when her local repair man fixed her furnace free of charge.

Bridget Stevens returned to her Pittsburgh-area home earlier this month and realized her furnace was not functioning.

Stevens’ story, which she shared on Facebook, has now gone viral.

Stevens texted her husband, Bobby, who is deployed overseas with the National Guard. When Bobby couldn’t figure out what to do, she called Betlyn Heating and Cooling in Moon Township, Pennsylvania. Owner Paul Betlyn immediately came to the rescue.

Betlyn, who has been in the business for more than 30 years, fixed the furnace quickly. Although the repair normally would have cost approximately $150, Betlyn said he decided to do the job without charging Stevens. He wrote on her bill, which came up to $1, that she received a “deployment discount.”

In her post, Stevens noted, “[Betlyn] said that the $1 was a joke and to thank my husband for his service.”

“I was completely overwhelmed and in shock when Paul handed me the slip,” Stevens told ABC News. “I didn’t really know what to say, and I still have a hard time finding the words to truly express my appreciation.”

Betlyn, 65, told ABC News his late grandfather, who is also named Paul, taught him about the importance of helping others and giving back to the community. …

Go here for the rest of the story.

AP’s Boak: ‘Americans Rushed to Buy New Homes in Dec.’ — A Whole 38,000

The hype machine was in overdrive at the Associated Press on Wednesday as economics reporter Josh Boak covered the government’s mid-morning release on new-home sales.

Boak opened by writing that “Americans rushed to buy new homes in December at the strongest pace in 10 months.” Good heavens, we’re talking about only 38,000 individuals or families, or about 0.031 percent of the nation’s roughly 123 million households. While that’s a bit of an improvement over previous months — which is why that number converted to a seasonally adjusted annual rate of 544,000, the highest figure since February — it’s hardly the stampede implied by the AP reporter’s use of the word “rushed.”