The economy is shrinking — wait, it’s growing!
The Institute for Supply Management — the pros who count the widgets — 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 past 1,916.00
Once the ISM realized it issued the funky financials — roughly 60 minutes later — it revised them twice to properly show some growth in May.
The S&P rebounded on the amended ISM data and moved into positive territory, to close at 1,924.97.
The new ISM number is 55.4, up from 53.2 — which was the wrong number. Anything over 50 means manufacturing sector growth.
I started plugging the figures into my spreadsheet and the numbers weren’t adding up to what they reported.
- Economist Kenneth Kim
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 reality.
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 Web site, instead leaking corrections to reporters.
When the ISM first proved Kim right, he said, it was “awesome.”