Everyone should agree that journalists should be skeptical of authority and its claims. In fact, all of us should be. But there’s clearly a point when skepticism goes way over the top, and today’s Dow Jones Newswires coverage of a new report on manufacturing in the United States is a perfect example. And P.S. It’s thrust mirrors that of way too much coverage of the Trump economy.
The subject of the article was the research firm IHS Markit’s survey of American industry in December. I’ve previously written that these reports suffer some significant limitations, mainly because they use a very different methodology than the federal government’s various releases on the economy. But although I hardly take them as gospel, I track them if only because so many other students of the economy – along with investors – follow them to a fault.
And here’s how reporter Micah Maidenberg described the results:
> “An index that gauges manufacturing production declined last month and business confidence looking a year out dropped to its lowest point in more than two years.”
> “The pace of new-order growth was the weakest since September 2017, IHS Market found.”
> “Output and backlogs rose but the pace of job creation last month hit a level last seen in September 2017.
“Business confidence fell to its lowest level since October 2016.”
> “IHS Markit Chief Business Economist Chris Williamson said the weaker pace of economic expansion caused manufacturers to become less upbeat about 2019.
“Companies reported difficulties in finding workers and inputs, but the December survey the index is based on also ‘revealed signs of slower demand growth from customers, as well as rising concerns over the impact of tariffs.'”
“Two-thirds of respondents reporting higher costs attributed the increase to tariffs, he said.”
Apparently the only positive news in the survey? “New export orders grew at an accelerated pace last month, amid stronger demand from foreign customers.”
So clearly, the U.S. domestic manufacturing sector is headed for big trouble, right? Well, as that famous used car company commercial put it, “Not exactly.” Because here’s what IHS Markit also said about the subject:
> “December data indicated a slower, albeit still solid, improvement in the health of the U.S. manufacturing sector.”
> “[I]nflationary pressures eased at the end of 2018.”
> “Production growth remained solid in December, and at a rate that matched that seen in November. The rise in output was attributed to greater new order volumes.”
It’s possible that Maidenberg accentuated the negative because that’s the tack taken by that IHS Markit economist Chris Williamson in his individual comments. He emphasized that:
“Manufacturers reported a weakened pace of expansion at the end of 2018, and grew less upbeat about prospects for 2019. Output and orders books grew at the slowest rates for over a year and optimism about the outlook slumped to its gloomiest for over two years. The month rounds of a fourth quarter in which manufacturing production is indicated to have risen at only a modest annualised rate of about 1%.”
The “key findings” highlighted by IHS Markit were comparably gloomy.
But the overall IHS Markit headline number came in at a decidedly expansionary 53.8 (any figure above 50 is regarded as expansionary). IHS Markit itself said that this number “suggested a weaker, but still strong, improvement in operating conditions across the goods producing sector” and that although “ending the year with a softer overall expansion, the final quarterly average of 2018 was strong and quicker than that seen in 2017.”
Overall, manufacturing output kept rising in December. New orders kept increasing. And payrolls kept expanding. For good measure, not only did the prices manufacturers needed to pay for their parts, components, materials, and other inputs ease to an eleven-month low (to a level still deemed higher than average). But the prices manufacturers received for the goods they made “rose at a solid rate.”
Yes, momentum matters, and signs that it’s slackening somewhat are newsworthy. But so is the evidence that U.S.-based manufacturing keeps trucking along – whether reporters, and their editors, want to recognize this or not.