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Spot The Adjustment To The Seasonal Adjustment

Tyler Durden's picture




 

Recall how the prevailing excuse for all economic data missing in the past two months have been attributed to inclement weather which mysteriously has not been captured in seasonal adjustments? Well, something curious happened in today Durable Goods report.

As we noted previously, the reason why stocks posted a bounce when the report came out was the stronger than expected bounce in Durable Goods, and especially the Durable Goods ex transports print which rose 1.1% on expectations of a modest drop. It is here that a somewhat puzzling observation can be made. First, the Non-seasonally adjusted number in the series posted a $5 billion decline from December into January, in other words a 3.2% drop compared to the 1.1% seasonally adjusted change. But it is not the sequential data that is notable but the annual change which is where the seasonal adjustments are most obvious.

What happened in that set of data is that while the NSA Durables ex transport posted a tiny 0.4% increase, amounting to $533 million, the SA series showed a far more sizable $1.9 billion increase. This can be seen on the chart below.

Why is this curious? Because in all recent prior years, the year-over-year change was a lower increase in the SA data compared to the NSA.

 

And more to the point, here is the same chart showing just the difference between the two year over year data sets. Spot the outlier:

 

What does this mean? Simply, in January, the Department of Commerce decided to apply a far greater than historically applicable seasonal adjustment, boosting and skewing the data far more than history suggests it should, and giving the seasonally adjusted number the benefit of about $2.3 billion in extra "oomph" solely due to the discretion of the person applying a far stronger than deserve seasonal adjustment!

Sure enough, had an inline adjustment been applied, the Durable Goods ex Transports seasonally adjusted number would have been a decline sequentially, and in fact would have printed at -0.3%. Precisely in line with expectations. But that would hardly be enough to send the headline kneejerk algos into a momentum buying spree, which in a market that was threatening to drop on the overnight newsflow was not acceptable...

So much for seasonal adjustment not adjusting for the impact of the "harsh" January weather.

 

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Thu, 02/27/2014 - 10:47 | 4484303 Occident Mortal
Occident Mortal's picture

Because of snow?

Thu, 02/27/2014 - 11:01 | 4484359 EhKnowKneeMass
EhKnowKneeMass's picture

No. Because Obama!

Thu, 02/27/2014 - 11:55 | 4484653 Pool Shark
Pool Shark's picture

 

 

"It's Snow(den)'s fault!"

 

 

Thu, 02/27/2014 - 12:27 | 4484824 davinci7_gis
davinci7_gis's picture

There's a whole lot of durable good orders over there in that black box...just don't open up that black box to count them!

Thu, 02/27/2014 - 10:54 | 4484324 derek_vineyard
derek_vineyard's picture

because people were home signing up for OBomo care and had less time to purchase

Thu, 02/27/2014 - 10:54 | 4484326 fzrkid
fzrkid's picture

If this is true the long term consiquences are unimaginable.

 

Well maybe not, Auntie Yellen can keep the presses runnin

Thu, 02/27/2014 - 11:04 | 4484363 onewayticket2
onewayticket2's picture

"I have a pen, too."  - Janet

"me, three"  - BLS analyst

Thu, 02/27/2014 - 11:06 | 4484377 Rainman
Rainman's picture

It's a midterm elections seasonal adjustment and the Commerce Department works for Oblameo...in case anyone forgot.

Thu, 02/27/2014 - 11:10 | 4484397 youngman
youngman's picture

Yes elections coming up so watch...no wait for more Democrat friendly adjustments to any Government number...the Democrats need a sound bite or 2 of positive news...

Thu, 02/27/2014 - 11:12 | 4484402 SheepDog-One
SheepDog-One's picture

Damn you slightly below normal temperatures!!

Thu, 02/27/2014 - 11:14 | 4484413 The Wisp
The Wisp's picture

A Fudge Here a Fudge there.. pretty soon you are smoking some pretty funny Brownies...

Thu, 02/27/2014 - 11:21 | 4484466 Pairadimes
Pairadimes's picture

Fake it 'til you make it!

- soon to replace e pluribus unum on American currency.

Thu, 02/27/2014 - 11:23 | 4484477 Tsar Pointless
Tsar Pointless's picture

I blame the Polar Vortex. And Groundhog Phil, too.

Thu, 02/27/2014 - 12:52 | 4484971 Mentaliusanything
Mentaliusanything's picture

That damned rodent done cost me extra in mys heating bill.

One days Phil is going to meat Fillo pastry

Thu, 02/27/2014 - 11:27 | 4484498 adr
adr's picture

Phantom sold products, phantom built homes, phantom sold homes, phantom jobs created.

Media reports the fake data as real. Real results in the stock market.

Thu, 02/27/2014 - 11:35 | 4484543 LawsofPhysics
LawsofPhysics's picture

Yes, and as a person/corporation I have decided to pay phantom taxes...

Thu, 02/27/2014 - 11:34 | 4484541 LawsofPhysics
LawsofPhysics's picture

The "truth" is what the criminals in D.C. and their puppet masters say it is,  stop asking questions peasant!

Thu, 02/27/2014 - 11:53 | 4484630 The Most Intere...
The Most Interesting Frog in the World's picture

Leave it to CNBC fascists to do some hard hitting reporting and get to the bottom of this...  

Durables surprise to the upside

Orders for long-lasting U.S. manufactured goods excluding transportation unexpectedly rose last month as did a gauge of business spending plans, but that will probably not change views that factory activity is slowing.

The Commerce Department said on Thursday durable goods orders excluding transportation rose 1.1 percent, the largest increase since May, after falling 1.9 percent in December. Economists polled by Reuters had expected this category to fall 0.3 percent after a previously reported 1.3 percent decline in December.

Thu, 02/27/2014 - 11:55 | 4484652 The Most Intere...
The Most Interesting Frog in the World's picture

LOL more....

Hard to tell how much weather played a role in recent economic weakness: Fed Chair Yellen
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