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Philly Fed Survey: Revised 2012 Shows Much Weaker Economy

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    January 13, 2013

    Here is the problem with all economic analysis – data revisions.  Each month economists, analysts and the media work off reported numbers to make assumptions about the economy.  However, the problem is that most of the assumptions made generally wind up being wrong when the data is revised.   This is one reason why predicting recessions is so difficult.  Currently, there are many that foresee “no recession” in the coming months and that may well be the case.  However, as I have discussed previously, the problem that exists for me, any other student of the economy, is that we are all working with lagging data that continues to be revised at much later dates.  Waiting on these data revisions is specifically why the National Bureau of Economic Research’s (NBER), who officially dates recessions in the U.S., announcements are always months after the recession actually started.

    This week the Philadelphia Federal Reserve issued their revisions to the widely followed Philadelphia Federal Reserve Survey for 2012.  The chart below shows the difference to the“Current General Activity” portion of the survey which is what is reported by the media.


    What is important to notice is that the survey overstated both strength and weakness in the survey all year long.  However, the deterioration in the subcomponents was just as notable particularly in the areas that most directly affect employment – backlogs, and new orders.


    Furthermore, future expectations have been sharply declining since September.  The outlook for overall activity, new orders, shipments, backlogs, and employment have all been negatively impacted since the election.  While future expectations of capital expenditures have risen during the last quarter this is most likely a function of plans to increase productivity to preserve compressing profit margins.


    Regardless, there are few relative positives and the revisions in the data for 2012 showed a much weaker environment than previously believed.   In the coming months ahead we will get the annual revisions to incomes, spending, and employment which are all primary constituents of the GDP calculation and the determination of a recession.  While I currently do not expect a recession in the near term we cannot rule out the possibility of one later in 2013 due to higher taxes and potentially larger than expected cuts in spending.  We remain conservatively invested until we are past the debt ceiling debate and have more clarity on the direction and trend of the markets.

    Images: Flickr (licence attribution)

    About The Author

    Lance Roberts – Host of Streettalk Live

    lance robertsAfter having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; Lance has pretty much “been there and done that” at one point or another. His common sense approach has appealed to audiences for over a decade and continues to grow each and every week.

    Lance is also the Chief Editor of the X-Report, a weekly subscriber based-newsletter that is distributed nationwide. The newsletter covers economic, political and market topics as they relate to the management portfolios. A daily financial blog, audio and video’s also keep members informed of the day’s events and how it impacts your money.

    Lance’s investment strategies and knowledge have been featured on Fox 26, CNBC, Fox Business News and Fox News. He has been quoted by a litany of publications from the Wall Street Journal, Reuters, The Washington Post all the way to TheStreet.com as well as on several of the nation’s biggest financial blogs such as the Pragmatic Capitalist, Zero Hedge and Seeking Alpha.