{"id":2560,"date":"2008-10-30T15:45:00","date_gmt":"2008-10-30T15:45:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2008\/10\/30\/todays-gdp-release-leaves-ism-with-egg-on-its-face\/"},"modified":"2023-06-26T06:53:47","modified_gmt":"2023-06-26T10:53:47","slug":"todays-gdp-release-leaves-ism-with-egg-on-its-face","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/todays-gdp-release-leaves-ism-with-egg-on-its-face\/","title":{"rendered":"Today&#8217;s GDP Release Leaves ISM With Egg On Its Face"},"content":{"rendered":"<p>If you\u2019ve been a long-time reader of this blog, you know that I am critical of ISM\u2019s claims that its PMI is a good economic indicator. Well, today, we\u2019ve got some pretty conclusive proof that I\u2019m not wrong about it.<\/p>\n<p>Don\u2019t miss updates on Procurement &amp; Supply Chain, Subscribe here!<\/p>\n<p>Today, the United States Commerce Department reported that the economy contracted in the July \u2013 September 2008 quarter with GDP shrinking at a 0.3% annual rate.<\/p>\n<p>So what did ISM say happened to the economy during this same time period?<\/p>\n<p>They said it grew.<\/p>\n<p>Here\u2019s what they said in their last three \u201cReports On Business\u201d covering the same quarter:<\/p>\n<ul>\n<li>In the July report, ISM said that \u201cthe overall economy grew for the 81st consecutive month\u201d; \u201cthe PMI indicates the overall economy is growing and the manufacturing sector is unchanged from June\u201d; and \u201cif the PMI for July is annualized, it corresponds to a 2.8 percent increase in real GDP annually.\u201d<\/li>\n<li>In the August report, ISM said that \u201cthe overall economy grew for the 82nd consecutive month\u201d; \u201cthe PMI indicates the overall economy is growing\u201d; and \u201cif the PMI for August is annualized, it corresponds to a 2.8 percent increase in real GDP annually.\u201d<\/li>\n<li>In the September report, ISM said that \u201cthe overall economy grew for the 83rd consecutive month\u201d; \u201cthe PMI indicates the overall economy is growing \u201c; and \u201cif the PMI for September is annualized, it corresponds to a 0.8 percent increase in real GDP annually.\u201d<\/li>\n<\/ul>\n<p>While others in the sector have given an argument such as \u201cwell, at least ISM\u2019s index is directionally accurate,\u201d here\u2019s a perfect example of how it\u2019s not even directionally accurate.<\/p>\n<p>Sure, when you have seven years of growth and an index indicates growth \u2013 even disproportionate growth \u2013 it\u2019s easy to believe in the index. But it is times like these when we have swings between expansion and contraction that the true colors of an index are revealed.<\/p>\n<p>If you\u2019re interested in more details about why ISM\u2019s PMI is so flawed, here are links to some of my earlier posts and an interview:<\/p>\n<p>Caveat Emptor: Economic Indices Could Be Misleading You (November 30, 2006)<\/p>\n<p>ISM\u2019s PMI is BS (February 6, 2008)<\/p>\n<p>The ISM Index Gets More Amusing By The Second (March 4, 2008)<\/p>\n<p>Another ISM Index Contradiction (March 5, 2008)<\/p>\n<p>I dislike being negative due to there being enough of that in the election, but the release of the GDP report demanded the right timing.<\/p>\n<p>More positive stuff coming soon, I promise!<\/p>\n<p>UPDATE 11\/25\/2008: The US Commerce Department today released an update to the 3rd quarter GDP numbers, now saying that the economy shrunk 0.5% instead of 0.3%. This widens the gap between reality and the ISM numbers.<\/p>\n<p><strong>Recommended Reading<\/strong><\/p>\n<p><a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/eprocurement-for-free\/\" aria-label=\"\u201ceProcurement for Free?\u201d (Edit)\">eProcurement for Free?<\/a><\/p>\n<p><a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/profit-growth-through-procurement\/\" aria-label=\"\u201cProfit Growth Through Procurement\u201d (Edit)\">Profit Growth Through Procurement<\/a><\/p>\n<p><a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/struggling-to-manage-commodities-prices-dont-miss-this-article-podcast\/\" aria-label=\"\u201cStruggling To Manage Commodities Prices?  Don\u2019t Miss This Article &amp; Podcast!\u201d (Edit)\">Struggling To Manage Commodities Prices? Don\u2019t Miss This Article &amp; Podcast!<\/a><\/p>\n<p><a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/environmental-responsibility\/\" aria-label=\"\u201cEnvironmental Responsibility\u201d (Edit)\">Environmental Responsibility<\/a><\/p>\n<p><a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/spsm-program-called-the-most-current-and-world-class-supply-management-course\/\" aria-label=\"\u201cSPSM program called \u201cthe most current and world-class supply management course\u201d\u201d (Edit)\">SPSM program called \u201cthe most current and world-class supply management course\u201d<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019ve been a long-time reader of this blog, you [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":4032,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2560","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v19.4 (Yoast SEO v19.13) - 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