First, the good news. The Associated Press's Martin Crutsinger didn't handle his coverage of today's release of May's "Manufacturing and Trade Inventories and Sales" report by the Census Bureau as incompetently as he did the report on wholesale sales and inventories he filed on Friday. Visitors here may recall that the AP reporter referred to a key figure as "inventories" when it really represented "sales." As a result, the typical reader of Crutsinger's Friday AP dispatch could not have known that he was either ignorantly or deliberately covering up a serious 3.8 percent decline in year-over-year sales (6.8 percent before seasonal adjustment) — yet another in a string of such troubling monthly comparative decreases.
The bad news is that in covering the government's manufacturing-related report today, Crutsinger failed to report yet another serious year-over-year sales decline in an economy which we're supposed to believe is growing. Many readers will come away from Crutsinger's coverage and its accompanying headline believing that things are really all right. They're not.
As will be seen after the excerpt, the underlying raw (i.e., not seasonally adjusted) data is showing even worse declines which the government's seasonal adjustments are inexplicably mitigating (bolds are mine throughout this post):
US BUSINESS STOCKPILES RISE IN MAY
U.S. businesses added to their stockpiles in May, while sales rose for a third straight month.
Business stockpiles in May edged up 0.3 percent from the previous month on a seasonally adjusted basis, the Commerce Department reported Tuesday. The result may indicate that businesses are optimistic about future sales.
Sales in May were up 0.4 percent following gains in March and April. Before March, sales had posted seven straight monthly declines.
Economists are forecasting sales to keep rebounding in the second half of this year and that consumer spending will help lift overall economic growth.
While rising inventories can indicate optimism about futures sales, they could also indicate that businesses have overstocked during a period of sales declines and are having a hard time bringing their stockpiles in line.
That there has been a serious sales decline is indisputable:
Seasonally adjusted sales have trailed the same month in 2014 in each of this year's first five months. May's decline compared to May 2014 was 2.2 percent.
Given what we seen in the raw (not seasonally adjusted) numbers, that decline arguably should have been far greater, and should have led to a seasonally adjusted figure even lower than April 2015. This year has by far the smallest April-May increase in raw sales in the past five years (only +0.9 percent); yet the May 2015 seasonally adjusted result is better (+0.4 percent) that the average of the previous four years (+0.2 percent).
That doesn't make sense. As I wrote at my home blog this afternoon:
We can argue all day long about whether the seasonal conversions were done correctly.
What we can’t argue about is whether the raw data is far worse than the seasonally converted data indicates. It is — much, much worse. The “Manufacturing and Trade” elements of the economy continue to be in a downward spiral.
And, I should add, that spiral worsened significantly in May, with a raw year-over-year decline of 4.3 percent (vs. falls of 2.5 percent and 0.9 percent in April and March, respectively).
So why should businesses be "optimistic about future sales," Marty?
Meanwhile, as seen here, May 2015 raw inventories were 2.4 percent higher than they were in May of last year. A trend of higher inventories combined with lower sales is not sustainble. There either has to be a big sales pickup around the corner (doubtful, as noted) or businesses are going to have to seriously trim their inventories.
Despite all of this, people who rely on the AP's take will think that the inventory buildup is a positive thing, that sales are recovering, and that all is reasonably well.
This is how low-information news consumers — and voters — are fooled.
Cross-posted at BizzyBlog.com.
