Today's release from the Federal Reserve on industrial production (including mining and utilities) told us that it declined by a seasonally adjusted 0.2 percent in May. It was the sixth consecutive month showing a decline or no gain, during which time output has fallen by 1.1 percent (not annualized).
Bloomberg News, which reported that economists and analysts expected an increase of 0.2 percent, described the result as "unexpected." Reuters gave us the adverb version of the U-word: "U.S. industrial production unexpectedly fell in May." In covering the news, Associated Press reporter Josh Boak failed to note the length of the protracted slump, and even went into a light version of "Happy Days Are (Still, Probably, We Really Hope) Here Again," using a sentiment survey to argue against the hard information collected by the Fed.
Boak told readers that today's result was "hurt by a decline in oil refining that overshadowed solid gains by automakers," and that declines in certain manufacturing sectors "reinforced the possibility of a prolonged slump." Most of us would say that six months is already quite "prolonged," Josh.
Yet just a couple of paragraphs later, the AP reporter was contending that the good news in auto manufacturing might somehow lead to better news overall in the coming months:
In a sign of consumer strength, auto production rose 1.7 percent, according to the Fed's industrial production figures. The third consecutive monthly improvement at auto plants is among the signs of a broader factory comeback.
"We are not surprised by the sluggishness of manufacturing, and it does not change our view that the consumer will be at the forefront of the economy over the next year," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
More people are buying autos. Cars and trucks sold last month at an annual pace of 17.8 million - the fastest monthly rate since 2005, according to industry analyst Autodata Corp. The greater demand could keep assembly lines humming at auto plants.
Other reports indicate that an industrial resurgence could help propel stronger growth through the rest of 2015.
U.S. manufacturing growth improved in May for the first time in six months, according to the Institute for Supply Management, a trade group of purchasing managers.
The problems with the ISM Manufacturing survey are twfold. First, it's a survey of sentiment and not a hard-dollar measurement (Boak arguably implied that it's the latter). Second, it no longer seems to bear any resemblance to what is happening in the real economy as it once did fairly consistently before last decade's official recession.
The ISM survey has indicated that expansion has been taking place in manufacturing during each of the past six months, while manufacturing output per the Fed's report, which is based on the accumulation of real data, has fallen during four of them, declining by a cumulative 0.8 percentage points (again, not annualized) during that time.
As to the "expert" Boak quoted, Mr. Shepherdson is almost perpetually optimistic, at least when a Democrat is in the White House, to the point of causing me to be unsurprised if I were to learn that he was seen loading up on suntan oil at the beach during a driving rainstorm.
The writeup at Bloomberg by Victoria Stilwell was far more reality-based, and essentially revealed that today's result was not a one-off:
Production Slump in Unexpected Area Blindsides U.S. Factories
American manufacturers are suffering from whiplash: Just as one area begins to perk up, another lapses into a funk.
A slump in output of military hardware and of non-durable goods such as food and fuel triggered an unexpected 0.2 percent drop in industrial production, according to data from the Federal Reserve issued Monday. More typical factory mainstays, including autos, machinery and business equipment, showed signs of life.
While data for non-durables tends to be noisy, “the big picture is that manufacturing activity has gone nowhere,” said John Ryding, chief economist at RDQ Economics in New York. “Manufacturing was a big source of economic activity in 2014, and now it’s not contributing at all in 2015.”
... April data were revised to show a 0.5 percent drop compared with a previously reported 0.3 percent decrease.
John Ryding is understating the damage. Manufacturing, and industrial production in general, have been drags on the economy this year. Here is the overall look at industrial production:
After two good quarters last year, it's dropped like rock, continuing to do so even after the biggest excuse everyone has been using — winter weather — has become a distant memory.
Stilwell also went to the ISM survey as a defense, writing that its "data are at odds with the prolonged slowdown signaled by the Fed’s industrial production report." The problem, ma'am, is that the ISM report is a sentiment survey, and does not represent an accumulation of hard data.
Over at Reuters, Lucia Mutikani also failed to note the length of industrial production's non-winning streak, and put on a happy face in her dispatch's second paragraph:
The softness in the production side of the economy is in stark contrast with upbeat data on retail sales, employment, consumer and small business confidence, which have pointed to a pick-up in growth after a sluggish start to the second quarter.
As I noted last night (at NewsBusters; at BizzyBlog), May's retail sales were artificially pumped up during the seasonal adjustment procuess. We all know, or should know, that full-time employment in this economy is still below its prerecession peake 7-1/2 years ago. Finally, confidence is important, but it alone doesn't generate solid results.
Reacting to today's report, the contrarian blog Zero Hedge noted that the industrial production data seen during the past six months "flashes (a) recessionary red flag."
If a Republican or conservative was in the White House, the establishment business press would be telling the general public the same thing. We know this because they did it in 2003, and 2004, and 2005, 2006, and the first half of 2007 — even when there was hardly a whiff of recessionary evidence anywhere.
One other thing which definitely was not in evidence in today's wire reports, as has been the case with the vast majority of press reports containing lousy economic news during the past six-plus years: the name of Barack Obama, whose policies apparently have absolutely nothing to do with the economy's prolonged misery and mediocrity. (/sarcasm)
Cross-posted at BizzyBlog.com.
