CNN Economic Journalism Fail
In a story today discussing the weaker than expected manufacturing data out of the Chicago manufacturing region, CNN framed some economic data as such:
CNN
Stocks Fall on Scary Manufacturing Data
NEW YORK (CNNMoney) -- Investors were spooked after a dismal report on manufacturing in the United States...
Stocks opened lower but the sell-off gained steam after the Chicago Purchasing Managers Index for September, a key gauge of manufacturing activity, came in far below expectations and showed a contracting economy for the first time since 2009.
Sorry, CNN. For the record, a barely sub-50 reading out of the Chicago region in September only indicates that manufacturing was running a teeny-tiny bit below its August levels ... in that part of the country, and is a far, far cry from suggesting that the U.S. economy at large was contracting.
Nice try.
Here is a graph of the Chicago PMI covering over 40 years. Over that time the index has straddled the 50 level dozens of times, sometimes for years at a stretch, without the broader U.S. economy contracting. In fact, because manufacturing nowadays constitutes a much smaller portion of the U.S. economy as a whole, manufacturing generally has to fall much farther below the break-even '50' than in the past to seriously impact GDP. These days, as was the case in 2007/2008/2009, there was a concurrent sub-50 reading in services spanning several months and covering many more Fed regions than just the Chicago area which helped drag down U.S. economic growth to below zero.
Above: Chicago area sub-50 readings occurred multiple times in the 80s, 90s and 2000's without the U.S. economy contracting.
CNN
Stocks Fall on Scary Manufacturing Data
NEW YORK (CNNMoney) -- Investors were spooked after a dismal report on manufacturing in the United States...
Stocks opened lower but the sell-off gained steam after the Chicago Purchasing Managers Index for September, a key gauge of manufacturing activity, came in far below expectations and showed a contracting economy for the first time since 2009.
Sorry, CNN. For the record, a barely sub-50 reading out of the Chicago region in September only indicates that manufacturing was running a teeny-tiny bit below its August levels ... in that part of the country, and is a far, far cry from suggesting that the U.S. economy at large was contracting.
Nice try.
Here is a graph of the Chicago PMI covering over 40 years. Over that time the index has straddled the 50 level dozens of times, sometimes for years at a stretch, without the broader U.S. economy contracting. In fact, because manufacturing nowadays constitutes a much smaller portion of the U.S. economy as a whole, manufacturing generally has to fall much farther below the break-even '50' than in the past to seriously impact GDP. These days, as was the case in 2007/2008/2009, there was a concurrent sub-50 reading in services spanning several months and covering many more Fed regions than just the Chicago area which helped drag down U.S. economic growth to below zero.
Above: Chicago area sub-50 readings occurred multiple times in the 80s, 90s and 2000's without the U.S. economy contracting.