Today's "I'm just making stuff up on the fly" award nominee is Martin Crutsinger at the Associated Press.
The AP reporter, named by National Review's Kevin Williamson as America's "Worst Economics Writer" in 2013, lived down to his designation in a Tuesday report on the Census Bureau's September Monthly Trade Inventories and Sales release. He described a sales increase which didn't come close to offsetting the previous month's decline as "robust," failed to note that the reported increase in inventories will likely increase third-quarter GDP while perhaps depressing the fourth quarter, and described a "major effort to work down an overhang" in inventories not found in the report he was covering. His most important miss, though, was failing to note that trade inventories remain dangerously bloated.
Here are several paragraphs from Crutsinger's report (bolds and numbered tags are mine):
US WHOLESALE STOCKPILES UP 0.5 PERCENT IN SEPTEMBER
U.S. wholesalers boosted their stockpiles in September by the largest amount in three months, responding to a robust rebound in sales. [1]
Stockpiles at the wholesale level increased 0.5 percent, the biggest increase since a 0.7 percent rise in June, [2] the Commerce Department reported Tuesday. Inventories had risen 0.3 percent in August.
Sales advanced 0.5 percent in September, recovering from a 0.9 percent fall in August. [1] It was the biggest gain in five months.
Economists are forecasting further sales gains in the months ahead. Rising demand is expected to boost confidence among businesses and prompt them to expand stockpiles. [3]
A major effort to work down an overhang of unsold inventories was a big drag on economic growth in the summer. [2]
The cutback in inventory restocking reduced economic growth by 1.4 percentage points in the third quarter. [2]
Notes:
[1] (tagged twice) — The "robust" increase in sales was barely half of the August decline. More importantly, as seen here, seasonally adjusted September sales were 3.9 percent below September 2014. After subtracting petroleum products, a sector where prices have have declined, and vehicles, a sector doing well largely (perhaps only) because even people with bad credit can drive cars away from dealers' lots with very low or no down payments and 6-7 year loans, year-over year-September sales only increased by 1.5 percent. That's hardly "robust," Marty.
[2] (tagged three times) — Readers trying to make sense out of how wholesale inventories could have increased in June and September, during a period of an alleged "major effort to work down an overhang of unsold products," shouldn't try. It doesn't make sense. The real message here is that the reported takedown of inventories in the third quarter didn't happen to the extent originally estimated in last month's GDP report. Moody's adjusted its estimate for revised third quarter growth to 1.7 percent as a result of today's news, and indicated that "the inventory correction will likely now extend into this quarter," potentially lowering final-quarer GDP. Crutsinger appears not to have grasped the significance of any of this.
[3] — Crutsinger's confidence about "further sales gains in the months ahead" is not universally shared, especially because consumer expectations about increases in income have cratered. Far more important, even if sales do advance, the fact remains that inventory levels are dangerously high, as seen in this graph presented earlier today at Zero Hedge:
The Inventories-to-Sales Ratio has been at levels previously been seen during recessions for several months. That doesn't mean we're in a recession or about to be in one (though it would be foolish to completely rule out the latter). But it does mean, contrary to Crutsinger's portrayal, that this month's inventory increase was more than likely not a favorable development.
Cross-posted at BizzyBlog.com.
