People Just Don’t Understand Economic Numbers, Do They?

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Or perhaps it’s just journalists who don;t understand economic numbers. Well, journalists and politicians then. An example here being the latest snapshots from the purchasing managers indices:

Eurozone Manufacturing PMI arrives 39.5 in May vs. 38.0 expected.
Bloc’s Services PMI stands at 28.7 in May vs. 25.0 expected.
The Eurozone manufacturing sector attempted recovery from the sharpest deterioration on record this month, the latest manufacturing activity survey from IHS/Markit research showed on Thursday.

The Eurozone manufacturing purchasing managers index (PMI) rebounded from an all-time low of 33.4 in April to 39.5 in May and surpassed 38.0 expectations while the Services PMI jumped off a record low of 12.0 reported in April to 28.7 in May vs. 25.0 expected.

No, that’s not an attempted recovery. That’s showing that it’s still getting worse.

The PMI is set so that any reported number below 50 is contraction, above is expansion. And it’s also set so that the comparator is the month before. So, below 50 means contraction from the month before. The number is below 50? That’s contraction in May from the April number, isn’t it? Even if the higher number means the contraction is slower.

We’re back with velocity and acceleration here. Things the journalistic species have terrible problems with.

As it happens, yes things are getting better and not successively worse but the particular indicator the PMI isn’t showing that. Or, as Granny always told us, don;t believe everything you read in the newspapers.

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HJ777AddolffDave in L.A.Spike Recent comment authors
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Spike
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Spike

Derivatives! ow, my frickin’ head!

Yes, the “improved” numbers merely show that the deterioration has stopped accelerating, not that it has stopped. And the gratuitous comparison, to the deterioration that experts predicted, constitutes another fine pile of crap for spinmeisters to shovel, another criterion if you wish to paint a picture other than what is actually happening.

Dave in L.A.
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Dave in L.A.

My idea: Journalists who can pass a basic numeracy test can continue reporting data in native form. Diligent editors will restrict all others to using keywords such as ‘bignumber’, ‘badfraction’, ‘tinyamount’, etc.

Addolff
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Addolff

“Briefly stated, the Gell-Mann Amnesia effect is as follows: You open the newspaper to an article on some subject you know well. In Murray’s case, physics, In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them. In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or… Read more »

HJ777
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HJ777

The only thing surprising to me is that you didn’t find this misunderstanding in The Guardian, Tim. They have made this sort of mistake many times.