The REAL Economic Data Was Just Released, It's Not Good

Summary

The video script discusses the concerning trend of economic data revisions in the US, where initial positive reports are often significantly downgraded later. It highlights how this 'revision disease' affects major accounts like payrolls, retail sales, and industrial production, casting doubt on the true state of the economy. The conversation suggests that the real economy may not be as strong as headline numbers suggest, with underlying issues like weakening demand and layoffs potentially signaling a looming recession.

Takeaways

• 📉 The script discusses a concerning trend of downward revisions in major U.S. economic data, including payrolls, retail sales, and industrial production.
• 🔍 It highlights that these revisions are not isolated to one agency but are widespread across government agencies, such as the Bureau of Labor Statistics, the Census Bureau, and the Federal Reserve.
• 🛍️ Retail sales figures, which initially suggested a strong consumer spending and a possible avoidance of recession, have been subject to significant downward revisions, casting doubt on the initial positive interpretation.
• 📈 The script points out that while headline numbers may show positive economic indicators one month, they are often revised lower in subsequent months, indicating a potential overstating of the economy's health.
• 🌐 It raises the question of the reliability of high-frequency economic data, suggesting that initial reports may not accurately reflect the true state of the economy.
• 🤔 The discussion suggests that the revisions may be a sign of an economy that is not as strong as initially reported, with underlying weakness that is only revealed after revisions.
• 🏭 The industrial production figures, released by the Federal Reserve, have also been subject to substantial revisions, with initial positive reports being later adjusted to show contraction.
• 🛒 The script contrasts the positive but possibly overstated retail sales figures with real-world evidence from companies like Walmart, which suggests that consumer spending, especially on discretionary items, is not as robust as the headline numbers might imply.
• 📉 The consistent pattern of downward revisions across various economic accounts suggests a broader economic slowdown that may be more severe than initially thought.
• 💼 The Federal Reserve's data dependence is highlighted, with the potential for recent unfavorable data to influence monetary policy decisions, including the possibility of rate cuts.
• 🌐 The script concludes with a warning that the economy may be on the brink of a significant slowdown, with industrial companies reporting weakening demand and project delays, which could foreshadow a recession.

Q & A

What is the 'revision disease' mentioned in the script?

The 'revision disease' refers to the frequent and substantial downward revisions of preliminary economic data by various U.S. government agencies, affecting major economic accounts such as payrolls, retail sales, and industrial production.

Why is the revision of economic data a concern?

The revision of economic data is a concern because it can mislead the market and public perception about the actual state of the economy, often overstating initial positive figures and later revising them downward, which can indicate a weaker economy than initially reported.

How has the revision disease affected retail sales data?

The revision disease has led to significant downward revisions in retail sales data, such as the June figure being revised from flat to a substantial negative percentage, which can distort the understanding of consumer spending and the health of the economy.

What was the initial reaction to the industrial production data for July released by the Federal Reserve?

The initial reaction to the industrial production data for July was that it was sharply negative, which some attributed to external factors like a hurricane, suggesting that the negative number might not reflect true economic weakness.

What does the trend of revisions suggest about the economy?

The consistent trend of downward revisions suggests that the economy might be weaker than the initial headline numbers indicate, and that the positive numbers released are likely overstated, requiring a focus on the overall trend rather than individual data points.

Why might the Federal Reserve be concerned about the employment situation despite positive retail sales in July?

The Federal Reserve might be concerned about the employment situation because other economic indicators, such as industrial production and manufacturing output, are showing signs of weakness, and continued unemployment claims are not decreasing as expected, which could signal a looming recession.

What does the script suggest about the relationship between retail sales and industrial production?

The script suggests that there is a disconnect between retail sales and industrial production, as positive retail sales figures are not being reflected in industrial production, which is showing signs of decline, indicating potential weaknesses in the economy.

How do the revisions affect the perception of economic growth?

Revisions that consistently adjust initial estimates downward can create a perception that the economy is not growing as strongly as initially thought, which can impact investor and consumer confidence.

What does the script imply about the reliability of economic data from government agencies?

The script implies that the reliability of economic data from government agencies may be questionable due to the frequent and substantial revisions, suggesting that the data might not accurately reflect the true state of the economy.

What is the potential impact of the revision disease on market reactions and economic policies?

The revision disease can lead to market volatility and policy missteps, as initial data may trigger market rallies or policy adjustments that are later proven to be premature or incorrect when the data is revised.

How does the script relate the economic data to the narrative of a 'soft landing'?

The script suggests that despite some positive economic data points, such as retail sales in July, the overall trend of revisions and other economic indicators do not support the narrative of a soft landing, indicating that the economy may be headed towards a recession.