US Government Discovers 10 Years Of "Processing Errors" In Construction Spending Data Slamming GDP
Even as increasingly more parts of the economy, especially those with exposure to manufacturing and industrial production, sink into the recessionary quicksand, one sector that was seen as immune from the malaise gripping US manufacturing and was outperforming the overall growth rate of the US economy, was housing, and specifically spending on private and public construction: a direct input into the GDP model.
That all changed today when the US Census released its latest, November, construction spending data, which not only missed expectations of a 0.6% increase, but tumbled -0.4%, the most since June of 2014, while all the recent changes were mysteriously revised lower.
And then the source of the mystery was revealed: in the fine print of the release, the government made a rare admission: all the construction spending data for the past 10 years had been "erroneous."
In the November 2015 press release, monthly and annual estimates for private residential, total private, total residential and total construction spending for January 2005 through October 2015 have been revised to correct a processing error in the tabulation of data on private residential improvement spending. An Excel file containg all of the revisions can be found here
The result of the "revision" of the processing error is shown below: every month starting with April and going through October, was "found" to have been a lower increase than according to the previous data. Not only that, but the October print which had been the strongest since May, confounding many data watchers as it did not fit with anecdotal evidence of a dramatic slowdown in energy-related construction, suddenly was barely positive, leading to the November sequential decline, the worst since the -0.7% drop in June of 2014.
And here is the big picture: what it reveals is that while spending data in 2013 was revised substantially higher, it proves what many have known, namely that the economy is now slowing substantially and that what until recently was seen as the strong annual increase in construction spending, namely the 14.3% increase of September 2015, was in fact substantially lower.
The result is that the October Y/Y% change of 10.5%, and declining, is not only the lowest increase since April, but matches the level first reported in December 2013. In other words, contrary to the previous narrative suggesting construction spending was solid and supporting a growing economy, it has in fact been declining since June!
And to think of the tons of digital ink spent by "strategists" and experts analyzing construction spending "data" in the past 5 years...
Sarcasm aside, what this exercise proves - which is clearly meant to lower the goalseeked glideslope of the US economy and make it easier to enter recession - is what many have already said, namely that Yellen clearly missed her window to hike rates with the economy now clearly slowing down, and instead of tightening monetary conditions, Yellen should be easing and preparing to lower rates.
To be sure, this is not the first time the US government has slashed historical data on a wholesale basis due to "revisions" and "errors" - recall our post from December 2014 "The Housing Recovery Remains Cancelled Due To 6 Months Of Downward Revisions" in which we showed how 6 months of New Home Sales were quietly revised materially and, of course, to the downside.
And since as noted above, this data feeds straight into the GDP "beancounts", we expect substantial downward revisions of recent historical GDP data, which will once again confirm Yellen's rate hike error.
Finally, we now await for even more government data (perhaps payrolls is next) to "unexpectedly" be shown as having substantial historical errors, and be revised, like in the cases above, materially to the downside because it will look silly if the US economy jumps from growth straight into recession with existing "data sets" which reveal that the bulk of what passes for "data" at the US government is simply double and triple-seasonally adjusted GIGO.
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"Sarcasm aside, what this exercise proves - which is clearly meant to lower the goalseeked glideslope of the US economy and make it easier to enter recession - is what many have already said, namely that Yellen clearly missed her window to hike rates with the economy now clearly slowing down, and instead of tightening monetary conditions, Yellen should be easing and preparing to lower rates."
How could you raise rates from essentially zero? Maybe she knew this error would come to light and needed to give herself a head start where she could (mostly ceremoniously) lower rates "when the economy starts to slow down".
Oh ya about that water and power bill......
Abengoa, they got at least $25,000,000,000.00 in debt from "construction spending"
Hope they built something worth 25B.
Hey but I still bet they get their great pensions and health care paid forever...
This is the pattern. OVERSTATE current economic conditions to show things are great or at least pretty good. Then, when it no longer matters, correct prior periods so that today's bogus numbers look better than prior year's downwardly corrected numbers. NONE of it is reliable.
Post script a couple hours later. Calculated Risk is reporting that the report had significantly upward revisions. But the ZH chart showed significant downward revisions. Went to the source, but they're not showing a side-by-side comparision of data pre and post-revision. SO, any readers know where to find an easy-to-interpret chart showing the full data series before and after today's revision?
Timing is everything...I love the admission on day 1 of 2016 which is yet another data point which will be used to justify QE4. QE trial balloons will start going up after Fed starts mouthing about delaying more hikes which I would guess will happen middle of January if the ugliness continues
Ya and we will soon have zero unemployment.
Perhaps negative unemployment - O'czar has saved us all.
Eventually you are supposed to fall over when you're dead - unless it's "Weekend At Bernie's" I guess.
Or equally fitting: https://www.youtube.com/watch?v=4vuW6tQ0218
Phew, good thing they didn't discover 10 years of their own cognitive, moral and ethical malfunctioning...
It's for the Children.
I know where they went wrong - they did not add in the TINY houses I see on tv shows now, or small trailers, or tar paper shacks, or caves, or .... where people now have to live in this great economy.
I forgot shipping containers, cardboard boxes, tents,.....
Vans down by the river, I'm tellin' ya...
Imagine how much worse the record keeping would be if we didn't have our "best and brightest" working for the federal government!
"A" students work for the "C" students, whilst "B" students work for the government.
I'm just shocked, shocked I tell you.
Next up... AUTO sales
All the data is rigged except that from EIA regarding oil right Tyler? wake up they have been overstating inventory & supply as well as under estimating demand
now if only the FED could come out and say that all the market gains in the last 10 years have been erroneous and due to the plunge protection teams investment.
If we could see the real numbers it would be staggering. The unemployment numbers are the most absurd and when we mix in what the PPT does so often we have a plithora government manipulation.
Chief Inspector Renault: "Rick, I am SHOCKED, ShOCKED that gambling takes place in this establishment!"
Rick's employee from the gambling room of Rick's American Cafe: "Here are your winnings, Chief Inspector.:
- from the film "Casablanca", starring Humphrey Bogart
I am still waiting for them to add ILLEGAL DRUGS AND PROSTITUTION to GDP.
Like Italy and the UK did about 2 years ago.
My guess - they are waiting for the numbers to get real bad.
It's all Calvinball, all the time.
they were to busy watching russias, and chinas #'s.
wiil kyle bass split his shorts between yaun, and dollar now?
Tyler, even the revised numbers show construction spending still growing 10 per cent year over year---and that it's grown even faster than we thought over the last five years.
If anything, the revised numbers are more evidence in favor of a new credit-driven bubble, not less.
"Discovers"? LOL, they're finally admitting the numbers were cooked all along but being "PC" about it and using plausible deniability.
I am Jacks total lack of surprise.