The economy is shrinking — wait, it’s growing!
The Institute for Supply Management on Monday botched its monthly calculation of how much manufacturing grew in May — first reporting business last month had slowed, before revising it to a positive number.
The bad report first issued by the group — based on seasonal adjustments from the wrong month — pulled stocks down in early trading.
The S&P 500 Index fell 7.6 points, or about a half-percent, to just over 1,916.00, based on the ISM issuing the wrong number for the much-watched monthly report, which can give economists and investors a window into how robust the country’s manufacturing sector is.
Once the ISM realized it issued the funky financials — roughly 60 minutes later — it revised them to properly show some growth in May.
The S&P rebounded on the correct ISM data and moved into positive territory, to 1,924.57 in early afternoon trading.
The new ISM number is 55.4, up from 53.2 — which was the wrong number. Anything over 50 means manufacturing sector growth.
The lower number was out for about an hour before the ISM revised its calculation.
Stocks fell sharply when the erroneous report came out, with the Standard & Poor’s 500 Index dropping as much as 7.6 points to 1,915.98 before bouncing back above its opening level.
The misprint was first noticed by Kenneth Kim, an economist at Stone McCarthy Research Associates, in Princeton, NJ.
The first, lower number was “a shocker,” he said.
This could have been the first time that such a major error has occurred, Kim said.
“I started plugging the figures into my spreadsheet and the numbers weren’t adding up to what they reported,” he said.
He said that they used assumptions, called seasonal adjustments, that were meant for April, but instead applied them for May.
Those assumptions include higher manufacturing for April, which ended up making the May numbers look worse than they really were.
Kim’s team at Stone McCarthy called the ISM to report what they were pretty sure was an incorrect calculation, but didn’t hear anything back, he said.
Kristina Cahill, a spokeswoman for the ISM, didn’t return requests for comment.
As of 1 p.m., the ISM still hadn’t corrected its figures on its website, instead leaking corrections to reporters.
When the ISM first proved Kim right, he said, it was “awesome.”
“The mood was pretty great,” he said.