The coverage of Gross Domestic Product is, as longtime readers know, probably the most consistently dodgy work that the business media perform and, well, reading it generally makes me want to poke fingers in my eyes.
The dance has been played time and again over the years. The Commerce Department reports a GDP figure and the business media parrots it straight and, worse, they pontificate at length as to what this figure says about the economy.
Why is this perpetual mistake so pathetically bad?
Well, these reporters draw their myriad conclusions without ever deigning to mention that the number is very likely to be revised -- sometimes on the order of 50%. In other words, their initial conclusions about the economy are often proved wrong and they know it's going to happen because it has happened repeatedly. Put that in your 800 words of definitive conclusions and smoke it.
When revisions come out, their articles about new conclusions often include a disingenuous turn of phrase like: "Analysts were surprised by the extent of the revision, which made clear that the economy was on more solid
or less certain footing than previously expected."
For readers who swallow the Kool-Aid of one political party or another, put that Styrofoam cup down. It's no time to toast. This has happened under every political party and the revisions have gone every which way.
Just this week, the Commerce Department released the third quarter's first, fleeting, temporary, prone-to-evaporation number, and we'll get to the reporting on it, which has improved slightly under my scythe. (Although we've had a bit of a relapse since
two quarters ago. Bad habits die hard and come back to life like zombies.)
More importantly, we'll isolate the several different manners you now see GDP reported, from good to beyond horrible. (If you want to refresh your mind through a darkness tour of past mistakes, which are most remarkable, please read some of my
past work. I have neither the time nor strength of heart to
recount them here.
Anyhow, here's the breakdown in coverage, by type. Pay attention and you'll know what to look for and save yourself a lot of grief.
: For obvious reasons, I don't frequently grant work by
the coveted Business Press Maven "Nod of Approval" award, but, quite simply and inarguably,
this piece is the standard-setter for Gross Domestic Product coverage. In a staff-written piece, this was the fifth sentence, laying out all the issues and qualifiers and telling you what to look for and when:
"The figure is the first of three that will ultimately be released on the third quarter. Revisions are not uncommon. The second pass, the so-called preliminary estimates, will be available Nov. 29."
: This is the fourth sentence in
The New York Times
and, though I would have wanted more fill-out and a labeling of the Gross Domestic Product number when it is first mentioned as "preliminary," what're ya gonna do? I'll take it. Here's the line, set way up high, to let readers know that
everything they read after might be proved irrelevant in a matter of weeks:
"The report from the Commerce Department is a preliminary estimate of gross domestic product in July through September, a volatile period that included the bleakest moments of the summer's subprime mortgage collapse."
: Examples of the horrific are as plentiful as children coming down off of sugar highs in these days after Halloween. Look at an article in the renowned and revered
Wall Street Journal
, which offers this headline: "GDP's 3.9% Surge May Be Tough to Match."
They do this with no qualifier like: "If it's not revised downward by a factor of 50% or so."
Anyhow, within the body of the article, there is no Surgeon General's warning that the following conclusions garnered for this article might be hazardous to your pocketbook. Nor is there even the perfunctory use of a word like "preliminary" thrown in there, which we see elsewhere, the lowest bar to hurdle, but at least one that technically sets the record down accurately, even if it does not do enough to draw investor intention to that accuracy. What can be worse than no mention?
Welcome to Worse Than Horrific Land.
This is what drives The Business Press Maven to drink ... even more. Today's business media environment is filled with so much talk and follow-up talk. But even publications that manage to slip the now obligatory "preliminary" into their first report on GDP, drop the mention in subsequent reporting. It is, from that point on, taken as a matter of fact.
The New York Times
soon reported on the
decision to lower rates,
there was no preliminary. That initial, fleeting, written in lemon-ink GDP rate was effectively set in stone:
"Yet just a few hours before the Fed announced its decision, the Commerce Department reported that the nation's gross domestic product expanded at a healthy pace of 3.9 percent in the quarter that ended Sept. 30."
Any investor who did not know better was confused and you can't tell me the publication did not know any better. They knew enough to put in a disclaimer on this essential number the first time. If that does not earn a dreaded Business Press Maven Back of the Hand award, I'm not sure what does.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;
to send him an email.