It took the Associated Press barely 2-1/2 hours to bury the bad news in the Census Bureau's 10 a.m. release on February wholesale sales and inventories.
As of 12:32 Eastern Time, Martin Crutsinger's 10:21 a.m. time-stamped story was not present at the AP's Top 10 Business stories page (saved at my host for future reference), making it quite likely that the news won't get much prominence at the wire service's subscribing print, online and broadcast outlets. But the four hours-old ho-hum news that seasonally adjusted initial unemployment claims remained below the 300,000 level commonly seen as potentially troublesome was still on display.
Crutsinger's dispatch failed to cite the release's most troubling element, namely that monthly merchant sales are, even before adjusting for inflation, below where they were a year ago:
The economy advanced at reported annualized rates of 4.6 percent, 5.0 percent and 2.2 percent, respectively, in the second, third and fourth quarters of last year. Not annualized, this means that the economy was almost 3 percent bigger in real terms (i.e., after adjustments for inflation) in December 2014 than it was in March 2014.
The fact that wholesale sales, as well as factory shipments, are now running below what was seen during last year's first quarter — again, even before considering inflation — indicates that all of the related gains in these GDP-influencing elements during the previous three quarters have been reversed. The more such year-over-year declines we see, absent statistical cooking which unfortunately can't be ruled out, the more likely it is that significant elements of first-quarter GDP are going to show significant degrees of contraction when the related report is released three weeks from now. If GDP stays positive only because of inventory buildups which occurred despite declining sales, that will not bode well at all for subsequent quarters.
Crutsinger insisted on keeping up appearances, as seen in the following excerpts (bolds are mine):
US WHOLESALE STOCKPILES EDGE UP IN FEBRUARY
U.S. wholesale businesses increased their stockpiles by a modest amount in February, while sales kept falling.
Wholesale stockpiles edged up 0.3 percent in February after a 0.4 percent gain in January, the Commerce Department reported Thursday. Sales dropped 0.2 percent following a 3.6 percent decline in January, which was the largest decrease in six years. Sales have either fallen or been flat for the past seven months.
Economic growth has slowed over the past six months, but economists are looking for a rebound this quarter led by stronger consumer spending. If consumers do return to stores after a winter break, the renewed demand is expected to boost inventory building in future months.
The slowdown in the January-March quarter reflected in part disruptions caused by the severe winter and a labor dispute at West Coast ports that delayed shipments to factories and businesses. Many analysts believe the economy, as measured by the gross domestic product, grew at a modest annual rate of 1.5 percent or less in the first quarter. That would be even weaker than the 2.2 percent GDP growth in the October-December quarter.
But analysts remain optimistic that growth will rebound in the current April-June quarter and the second half of this year. Many are forecasting growth will average a healthy 3 percent for the rest of the year.
So 3 percent is "healthy"? It sure wasn't seen that way during the previous administration.
As to Crutsinger's take on estimated first-quarter GDP, he should have written "or far less" instead of "or less" than the 1.5 percent annualized rate he cited. The updated graphic from the Federal Reserved Bank's GDP Now estimate shows 0.1 percent as of April 2:
As explained above, it's not unreasonable to be concerned that tha Atlanta Fed may still be way too optimistic.
Cross-posted at BizzyBlog.com.
