One of the economy's more important bellwethers has been on a steep year-long decline which shows no signs of abating this year. It's barely news, and much of the sparse reporting seen has been incomplete and sloppy.
Truckinginfo.com reported today that "January was a tough month for truck manufacturers as Class 8 truck orders were down 35% compared to the previous month, according to a preliminary report from ACT Research." This follows a 2015 calendar year during which total orders came in 25 percent lower than 2014. A Google News search indicates that only Reuters and the Wall Street Journal found this information important enough to cover. Reuters might as well not have bothered, given the sloppiness of its report as carried at CNBC:
(Note: FTR used ACT Research Data in preparing its report.)
What reporter Nick Carey tried to say in his first paragraph is that January 2016 orders were 48 percent lower than January 2015 ("on the year" isn't exactly clear to the average reader):
It gets worse. Total orders in 2014 were 376,000, not the 276,000 Carey reported, as seen in FTR's release:
Believe it or not, Carey's Reuters story allegedly had an assigned editor, Grant McCool, who didn't catch that obvious blunder.
Brian Baskin's coverage at the Wall Street Journal was much better, and contained even more gloom:
Orders for new big rigs plunged in January, as trucking companies eyeing weak shipping demand held back from investing in fleets.
Just 18,200 new trucks were ordered last month, down 48% from a year earlier and marking the second-lowest monthly total since 2012, ACT Research said Wednesday. The data dashed equipment makers’ hopes that relatively strong December orders would carry over into the new year.
Instead, trucking companies are canceling expansion plans and postponing trade-ins for their older vehicles. They fear that new trucks will sit idle if lower-than-expected retail sales over the holidays and signs of contraction in the manufacturing sector translate into a sluggish freight market this year.
... ACT expects manufacturers to produce 250,000 new trucks this year, down over 20% from 2015. Production is likely to be only slightly higher than the number needed to replace older trucks leaving service, meaning few companies will expand their fleets, Mr. Vieth said.
Meanwhile, outfits like the Associated Press, which is among the many outlets which did not cover today's big-rig news, continue to regale us with their "All is well" mantra.
Josh Boak at the AP was definitely in that mode today as he covered the Institute for Supply Management's January Non-Manufacturing Index. That index fell to 53.5 percent in January from 55.8 percent in December. Though that result is still in expansion (any reading above 50 percent signifies expansion), it was the first indication that problems in manufacturing, which has been in ISM contraction for three months, are beginning to spread to the rest of the economy.
That didn't stop Boak from trying to paper over the implications of the decline:
SURVEY: GROWTH AT US SERVICES COMPANIES SLOWED IN JANUARY
A private survey says U.S. services companies grew in January at the slowest rate in nearly two years, as global economic challenges are showing some signs of spreading to consumers.
The Institute for Supply Management said that its services index fell to 53.5 last month from 55.8 in December. The January figure was the lowest since February 2014, when it was 52.6. Still, any reading above 50 signals that services firms are expanding.
"It's a little bit of a cooling off," said Anthony Nieves, chair of the ISM non-manufacturing business survey committee. But Nieves stressed, "As long as we're staying above the 50 baseline, things are still going in the right direction."
There are three problems with Mr. Nieves statement.
The first is that ISM's not seasonally adjusted information showed more weakness in January than the seasonally adjusted results revealed. For example, as Zero Hedge noted this morning, the unadjusted New Orders component fell by 7 points from December. A year ago, that component only fell by about a point from December 2014 to January 2015.
The second problem is that the representativeness of the Non-Manufacturing Survey, like its Manufacturing counterpart, may be suffering from selection bias. Those companies which are participating in ISM's surveys appear to be ones which are performing well, while firms which are struggling aren't participating. This has become an obvious problem in ISM's Manufacturing Survey, as the group's regional indices are mostly showing far deeper contractions than the national survey. It's hard to imagine that the same problem isn't present in Non-Manufacturing.
The third problem is that if you average in the current Manufacturing Index of 48.2 percent, which accounts for 12 percent of the economy, the Non-Manufacturing Index needs to be at 50.3 percent or greater, not just 50 percent. If it's not, the entire economy is in a net contraction. Quibbling? Perhaps, but I'm not the one who insisted that "things are still going in the right direction" with any reading above 50 percent.
The fact is that reporting on the important but dismal leading indicator of big-rig activity would get in the way of that "All is well" narrative. The AP, aka the Administration's Press, knows that we can't have that.
Cross-posted at BizzyBlog.com.