Garbage Stats and Real Stats: Lessons in who to believe on the economy

In January, 2015 heavy snowfall and cold weather across the country had everyone expecting a disastrous estimate of Q1 GDP. I’m sure you remember the vicious “polar vortex” that was endlessly reported at the time. And as predicted, in its April 29, 2015 first estimate of Q1 GDP, the Bureau of Economic Analysis (BEA) said the US economy grew by only 0.2%. The number was so bad the BEA decided to increase its seasonal adjustment provisions because they were obviously not adequately reflecting the impact of winter weather during the winter season.

Today, the BEA released its annual revisions to the National Income and Product Accounts. Following a slew of revisions, the weather-crushed 0.2% GDP first quarter of 2015 is now reported at 3.2%. Sorry folks, the polar vortex never happened.

And that’s why all official US government economic data is absolutely meaningless.

So, what’s a guy to do? Well, I have to follow the US official data anyway because everyone else does. But to find out what is really going on, I have to get my data from private enterprise…you know, the people who would go to jail if they reported the complete hooey served up by our overpaid government statisticians.

So, how is the real US economy doing? One of my top indicators is bank lending because that’s what actually turns the wheels of American commerce. And here it is…assembled by the Federal Reserve but from business reporting, in this case the commercial banks.

The annual growth rate of total commercial bank lending (chart below) is slowing rapidly this year; the rate of slowing is almost as fast as the abrupt drop in 2008 which signalled the crisis of later that year.

Commercial and Industrial loan growth (chart below) is also falling and is now perilously close to contraction which has marked every recession of the past. Note that the grey areas are periods of recession. There is no business revival according to these numbers.

The growth rate of loans to consumers is also on a downward path, as shown below.

Those are the real numbers folks. They clearly show an economy that is slowing down whatever the silly GDP data may say. Yet the Fed is raising rates and threatening to contract its balance sheet by selling securities into the market and draining the system of cash. Something ain’t right here dear reader and my figures don’t lie.