On February 12, in a report on inventories, the Associated Press's Martin Crutsinger referred to an economist who believed, in Crutsinger's words, "that the economy expanded at a 2 percent annual rate in the final three months of the year (2014)." That result would be a fairly significant downward revision to the 2.6 percent rate the government estimated in late January.
The next day, Macroeconomic Advisers, a leading economic research firm which describes itself as "independent with no loyalty to any political ideology," estimated that the economy, as measured in its Gross Domesitic Product, "declined by 0.6% in December, and growth for November was revised down by three-tenths." Since then, though they may be out there somewhere, I haven't seen AP or other major news outlets make any reference to analysts' revised fourth-quarter estimates.
As I noted at my home blog on Friday:
If Macro Advisers is right, then to even hold a 1.6% annualized result, October and November need to have advanced by a half-point each, or (ignoring compounding) an annualized rate of 6 percent each month. That would net out to +0.4 percent for the quarter (0.5 + 0.5 – 0.6), which would annualize to +1.6 percent.
Other economic reports published since the government's first fourth-quarter GDP release point to the potential for a significant haircut. The most important was probably the Federal Reserve's Wednesday release on Industrial Production, which revised October, November, and December down by a collective 0.5 points, reducing what had been a 1.2 percent increase during the quarter to just 0.7 percent.
A strange thing also happened during the past week over at Moody's Analytics. That's the home of Mark Zandi, a leading economist frequently seen on the cable business networks. Zandi seems quite vested in the idea that there's little to stop the economy from chugging along at 3 percent or so growth with 200,000 or more jobs added monthly for the next couple of years. In a conference call on February 4 addressing the results of January's ADP Employment report, Zandi indicated that in his view, the economy is "feeling pretty good," and that he expects it to continue.
On February 13, Moody's "U.S. High Frequency GDP Model" predicted that fourth-quarter GDP would be revised down to 2.0 percent or lower. A Wall Street Journal blog post that same day carried estimates from various sources of 1.7 percent to 2.0 percent. (Note: The reference to Macro Advisers found there was to the firm's Tuesday, February 10 estimate, i.e., three days before it revealed its monthly GDP revisions to November and December.)
This week, the visible narrative at Moody's GDP Model has been silent on fourth-quarter revisions, discussing only where the first quarter of this year might be headed. Perhaps the firm decided to reveal less of what is in its quite costly subscription to encourage sign-ups. Or perhaps it's taken its fourth-quarter GDP estimate down even further, and would prefer that the non-subscribing public be kept in the dark.
With all of this background, Crutsinger's final paragraph in a February 19 report on leading indicators had nothing to say about the existence of fourth-quarter revisions, let alone their direction, and should have said something:
Overall economic growth slowed to a 2.6 percent annual rate in the final three months of 2014 after gains of 4.5 percent in the spring quarter and 5 percent in the July-September period. Many economists say the economy is growing at a moderate pace of around 2.5 percent in the current January-March quarter.
If the estimates are varying widely, the AP reporter could at least have told readers that they're predicting a half-point or more reduction. Or he could have provided a range of available estimates from leading firms. But his silence leads readers to believe that there's no reason to expect a significant change when this Friday's official government report comes out, and that isn't the case.
This kind of failure to disclose may go a long way towards explaining why so many shocked post-release reports in the press talk of how such disappointing results occurred so "unexpectedly."
Cross-posted at BizzyBlog.com.
