Seasonal adjustment factors are mindless quantitative exercise especially misleading during economic recoveries (or expansions). When you have a strong pulse one month, and the next month is not quite as good – the seasonal adjustment factors look weak.
This is the situation as the US Census reported that manufacturing new orders for manufactured goods in February 2011 was down 0.1% following three consecutive monthly increases.
Econintersect’s analysis says it is wrong to imply manufacturing is down when you have the following conditions present in the unadjusted data:
- New orders are up 0.2% month-over-month (MoM); and
- Order backlog in February has grown 1% (MoM); and
- New orders are up 10% year-over-year (YoY).
It could be argued that manufacturing is not up as much as normal MoM. The graph below shows the YoY gain is not as much in February – but is easily within the normal variation MoM we have been seeing in the last six month.
The good news continues with manufacturing backlog’s gradual but quite smooth upward trend. This is telling us that capacity is matched to the economic conditions, and that the manufacturing sector is really growing.