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12
JUL 13

Lies, damn lies and surveys.




I recently had an email from member asking about all the claimed positivity that has been reported in the manufacturing sector, specifically by the PMI.

Here is the conversation:

Hi John,

Just give me a reality check here please!

As I understand it, the number is a relative measure, not an absolute one? So when the index shows “the biggest expansion in five years” this could in fact be off a base that is lower than some or any previous base?

I’m getting a bit tetchy about people telling me how great things are in manufacturing (the PM said so)!

Allen

--------------------------------

Hi Allen,

It depends on who and what you ask. The PMI has “how do you feel now vs. then” type questions, so is relative within the firm and like all surveys is subject to sample bias. And then it depends on what you want the numbers to say: last month our confidence measure jumped a good deal but looking a bit closer the biggest group was “no change” so the optimists (that had not changed much) stood out but really not much had changed so if the numbers don’t support the feeling we don’t emphasise the numbers – then again if you were an optimist or a pessimist last month and this month is the same do you tick what you were again or the no change box – it’s all a bit imprecise which is why we try to talk about trends, not one month’s numbers.

Back in the day when we supplied our data to Business NZ as part of the process their sampling was very inconsistent in other regions and from the CECC in Canterbury. The biggest expansion is a comment on how much the numbers move and would be accurate, but the question is what does that movement really mean, without sales data they are hard to calibrate and often with sales data the relative numbers don’t correlate with sales or employment. We tend to focus on sales and employment as hard numbers.

Yes the “who do you talk to” and “you should get out more” are comments we have made several times, BNZ positive comment in their release on the PMI has the phrase “manufacturing (who some claim are in crisis)” – and then goes on to hedge that comment. We all know bank economists work for their employers interests. All pretty dismal.

I think you are doing well to restrain yourself at “tetchy” on the agitation scale. Domestically focused manufacturer, particularly the construction sector (the manufacturers John McDermott said are captured in the RBNZ model of our economy) are good from volume and isolation from exchange rate issues perspective, so their feelings are being used to swamp the issues for manufacturing exporters. So we just have keep saying so; maybe someone will listen before it’s to late..

John


tags: manufacturing, pmi, survey, data, exports
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