As I was looking for news coverage of Thursday's horrid factory orders report from the Census Bureau late last week, I came across an incredibly optimistic Blomberg News report by Victoria Stilwell.
The headline of her story on July 1, the day before that factory orders release, read: "Factories Making a Comeback as U.S. Domestic Demand Picks Up." My reaction: On what planet? It turns out that Stilwell based her assessment on largely on a survey, namely the June Manufacturing Index published by the Institute for Supply Management earlier that day.
Stilwell really didn't even do a good job of interpreting the ISM survey (bolds and numbered tags are mine):
American factories are starting to climb out of a slump on the back of stronger consumer spending.
The Institute for Supply Management said its June factory index increased to 53.5, the best reading in five months, from 52.8 in May. Another report on Wednesday showed construction spending climbed 0.8 percent in May to the highest level since October 2008. [1]
Producers of lumber, furniture and fabricated metals were among the 11 industries growing in June, indicating a rebounding housing market and rising auto sales are rippling through factory floors. [2] That’s mitigating the damage of an energy-related retreat in corporate investment and weaker exports due to a stronger dollar.
The rebound is spurring demand for workers. Builder payrolls expanded by 19,000 in June, [3] helping boost employment at U.S. companies by the most in six months, a report from ADP Research Institute showed Wednesday.
... The group’s measures of new orders and manufacturing employment improved last month to the highest levels this year. [4]
... An improvement in demand for U.S. manufactured goods would help create a virtuous cycle of growth, [5] wherein factories boost headcount to help meet orders and consumers, armed with a new paycheck, spend more.
Notes:
[1] — Construction spending is a largely separate matter from Manufacturing, and has had a run of two good months after a rough first quarter.
[2] — As I noted the day the report was issued at my home blog, the 11 industries out of 18 which grew in June was lower than the 14 seen in May and 15 seen in April. That is not a positive trend, and certainly doesn't merit the over-the-top positivity seen here. ("Rippling through factory floors"? Holy moly.)
[3] — Unfortunately, the government's employment report issued Thursday reported that no seasonally adjusted workers were added in construction in June, and that only 1,000 were added in manufacturing.
[4] — I don't pretend to understand why, after decades of being a great leading indicator as to the general direction of business, the ISM survey has diverged so sharply from reality on the ground during the past several years. But it has. As I noted last night, the government reported Thursday that new orders for the first five month of this year are running 5.7 percent below the first five months of last year, and are even below levels seen in the first five months of 2012. How the ISM's New Orders component can possibly be so positive in these circumstances is a mystery. It's up to them to solve it. All I can say is that it doesn't reflect what's happening in the real world.
[5] — A virtuous cycle "would" be nice. But it's not happening.
Here's the bottom line, and Bloomberg's Stilwell should know this: A survey of a small sample of a much larger group simply asking whether certain items are increasing/decreasing or better/worse does not trump real data. As I noted yesterday, the real data in manufacturing — orders, output, and shipments — have been coming in at awful levels all year long.
As to how this horrid reporting can occur at a leading establishment press operation, I don't know what would be worse — learning that Stilwell really doesn't know any better, or finding out that she produced what she did to carry out a propaganda assignment.
Bloomberg's coverage of Thursday's Factory Orders report from the government appears to have been limited to a single paragraph in the middle of a report following the stock market's close. Readers relying heavily on Bloomberg have clearly been misled on the direction of manufacturing.
Cross-posted at BizzyBlog.com.
