No one does a better job of dissecting misleading government economic data than Chris Martenson. In his report below, Chris tells us why we can’t rely on recent government data that suggests we’ve reached the bottom of the current recession. As we’ve seen with many past economic reports – the government is ‘spinning’ data so that it appears positive – when the actual data tells us something else.
If you want to learn more about how our government manipulates economic data – I suggest you watch Chris Martenson’s ‘Crash Course’. Here’s the link to the ‘fuzzy numbers’ video of the Crash Course.
Fuzzier Than Ever - The Latest GDP Report
Thursday, April 30, 2009, 9:17 am, by cmartenson
• GDP report for 1Q2009 is a mess of Fuzzy Numbers
• The surprising 2.2% increase in PCE, or Personal Consumption Expenditures, is discussed
• Ostensible signs suggest that the bottom is in, but the numbers do not line up at all with hard, factual data
• Sales tax receipts declined in first quarter
• The GDP report for the first quarter of 2009 is in serious conflict with actual state sales tax data
• Vehicle sales are down nearly twice as much as the 19% claimed by the BEA
• The extent to which investors are fooled by these government reports is the extent to which they risk losing a lot of money in the stock market
• Trust yourself
As attendees of my seminars and regular readers know, I am deeply critical of the cheerleading spin cycle that exists between the government and the media, because it often inappropriately mixes facts, opinions, and beliefs. The aim, it would appear, is to foster optimism or confidence in the average investor.
Of course, as chronicled here many times, Wall Street lives off of the fees and products that it sells to retail investors, while the political machine favors a pacified, if not buoyant, electorate. Both of these aims are served by constantly spinning things to the upside.
While it is possible that "investors" are indeed optimistic, focusing on the "slightly more upbeat" report from the Fed and "signs that consumer spending rebounded," these claims deserve a bit of exploration.
GDP Report for 1Q 2009
This morning (Thursday, April 30), we were treated to this headline and story:
Stocks ready to charge again
Wall Street advanced Wednesday after the Federal Reserve issued a slightly more upbeat economic outlook. Signs that consumer spending rebounded in the first quarter, even as the economy contracted, also boosted optimism.
The spin cycle ran with a surprising 2.2% increase in PCE, or Personal Consumption Expenditures, the largest measure of consumer spending, which accounts for more than 70% of the economy. A rebound here could be a sign that the bottom is in, and that's how it was used, heavily, by the Wall Street spin-cycle apparatus. This is perfectly exemplified by a recent NY Times article (April 29) that stated (emphasis mine):
The American economy is contracting at its steepest pace in 50 years, the government reported Wednesday, but an unanticipated rise in consumer spending since January suggested to many economists that the worst of the recession might have passed.
Consumer spending stood out as the only significant bright spot in the Commerce Department's otherwise bleak update... Most of the spending was on autos, kitchen appliances, computers and other durable goods.
GDP in conflict with state sales tax data
To begin with, all 50 states reported large (and usually record breaking) declines in sales tax receipts in the first quarter. With the exception of food, which is largely exempted, nearly every other category of PCE spending is subject to state sales tax collection.
Here's a relevant article:
Sales tax receipts make up one of the best indicators of how a consumer-driven economy is faring. We're not faring well. And sales tax receipts are the primary source, outpacing income tax, for the majority of state budgets. Based on the numbers you're about to read, you can easily understand why so many state budgets are all but teetering in the wind.
[First quarter 2009] collections for the three major taxes were down $6.1 billion (-10.2%) from last year at this time. Retail sales [taxes] were down $2.1 billion (-10.8%), personal income taxes fell by $3.5 billion (10.5%), and corporate taxes were $472 million lower (-7.3%) than last year's total at the end of March.
At times like this, I would strongly caution you to remember that state sales taxes are simply collected and added up, while the GDP report is subject to all manner of politically-motivated adjustments and manipulations.
GDP in conflict with auto sales data
Sure enough, the Bureau of Economic Analysis GDP report shows that autos were sold at an annualized rate of $350.6 billion in 1Q09 which was a nice $16 billion gain over the prior quarter. Further the BEA reported that auto sales were down some 19% from the same quarter a year prior.
However, this information, too, is in dire conflict with hard, verifiable, real world facts. In reality, vehicle sales are down nearly TWICE as much as the 19% claimed by the BEA, at least if one counts vehicles that were, you know, actually sold.
Vehicle sales are off more than 38%. But that's not all. Given the levels of discounting involved this year compared to last, the dollar value of these sales should have been off more than 38%. Instead, the BEA has reported that motor vehicles and parts are only down 19% yr/yr.
Real-world data, consisting of simple collections and summations of taxes collected and vehicles sold, tells a starkly different tale from the sampled, adjusted, and otherwise manipulated data being reported by the federal government. The degree of separation between real-world data and reported numbers is the largest I've ever observed, leading to the conclusion that the use of Fuzzy Numbers is now worse than ever.
The extent to which investors are fooled by these government reports is the extent to which they risk losing a lot of money in the stock market.
While I understand the political desire to create a sense of optimism, the practice of fibbing to ourselves by our official numbers is abhorrent and is simply a continuation of the failed practices that led us into this crisis in the first place. We are doing ourselves no favors by continuing the practice of manufacturing fraudulent and misleading data simply for the purpose of attempting to make things appear better than they really are.
We overspent as a nation, and now it is time to live within our means. Do not be fooled by these so-called "glimmers of hope" – they are false.
Stay the course, and trust yourself to know what's right.