Examined a few corporates earnings releases for recent quarter (not very scientific I do realise).
No geographical breakdown I could find for GE, Microsoft,Viacom and Honeywell,
Coca Cola overall revenues down 9%, North America (40% of total) down 2%
UPS overall revenues down 17%, US (62% of total) down 12% Interestingly package volumes only down 4.7% overall - there’s a bit of deflation!
Dupont Non-US down 29%, US (45% of total) down 13%
3M worldwide down 15.1%, US down 10.5%
Harley Davidson showed a bigger fall in US sales.
The problem region in all cases seems to be Europe.
CONCLUSION would appear to be that using US Corporate revenues as a proxy for US GDP is not a great match. Part of the discrepancy would be explained by using US sales only.
However as I conceded in my earlier post this in no way implies that there is not a bias issue in the GDP data.
Isn’t this a y/o/y change chart? That being so, the change in GDP y/o/y would be worse (more negative) if government’s contribution to GDP is taken out, so it makes sense to me.
Edit: Didn’t realize Chris was talking about the LH side of the graph. No ideas. I don’t understand this.
First a general comment. Are all these statistics of any use? Basically all you really need is old fashioned double column book-keeping and cash-flow projections for the net six months.
Now to the possible explanation of the discrepancy, but that’s more for the sake of doing some mental workout.
A. Food stamps are consumer spending ok? but are they public consumption (procurement) or current expenditures (salaries). The consumer buys, but its actually US who pays. But I doubt that food stamps have already reached that order of magnitude (might happen one of these days though.
B. More plausible. S&P are mostly producers who sell wholesale, except cases like McDo. But people buy from retailers. Therefore a) retail price includes mark-up and b) there’s a lag between ex factory and retailers cash register. Plus 3, is book keeping done on accrual basis or on on treasury basis (other lag).
Just suggestions, I have no idea and I don’t really care, it’s just another teaser quizz.
Anton,
thanks for the S&P link it’s a good study. A couple of things about it…it is a sample of about half comprised of companies that had between 15% and 85% of sales in foreign lands and reported with sufficient detail for the purposes of the study. This capture from the report shows the breakdown:
We might surmise that the 50 issues with less than 15% and the 10 issues with more than 85%, if included, would have skewed the results some. Also, we might speculate that the 188 issues not reporting with enough precision to be included in the study probably don’t have extensive foreign operations like those that do report in detail. Usually the reason one reports with rich detail is because one has operations to report on…
So my take on this study is that it is largely confined to the very largest companies in the land and those tend to be more international than those that might comprise the entire universe of US public companies…there’s a good chance it is skewed.
There’s more to be done, I need more data! :) I think there’s something interesting to be learned here.
But I still cannot square up a reported 2% decline in PCE with sales tax and corporate revenue declines…it does not make sense to me that people can still be consuming for the purposes of GDP reporting without those purchases being reflected in the sales tax or revenue data. I’m still on the lookout for a good explanation for that phenomenon…
Chris,
I agree the discrepancy would still be noticable but you’re comparing a statistic measuring personal consumption that doesn’t measure all B2B transactions (which account for much of overall corporate revenues). Look at the Investment portion of GDP or real exports and you’ll see a considerable slide. I still think there are flaws in the GDP report in measuring economic progress (like how deficit spending contributes to positive growth despite representing future tax obligations or how a slide in both exports and imports can actually have a net positive impact on GDP).
To your point though, I suspect there will be multiple downward revisions in consumption. Clearly consumption has declined by more than is being reported and it’s frustrating that their forecasting is so favorable (or possibly manipulated)
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Edit: What’s the trick to show the graph in the blog? thanks.
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bluebird,
Use the icon that looks like mountains with a sun above it. If you hover over the icon, it says "Insert/Edit Image." Once in this pop-up window, you can upload a picture, or link to a picture elsewhere.
Note: We do not recommend linking directly to someone else’s website. This would cause us to be using another website’s bandwidth for serving pictures, and is considered bad Internet etiquette. As well, if the other website decides to eventually remove the picture or move it to a different URL, the picture will no longer be displayed on our site.
Instead, if you are the owner of a picture, I would recommend loading it to a site like Flickr, then referencing the Flickr URL here.
Chris,
Interesting analysis. I believe the issue of foreign revenues (for US corporations) is something that cannot be ignored. Another potential problem comes from focusing on publicly traded companies only. Private companies represent a large chunk of the economy and they dominate certain industries (for example, restaurants and higher education). Compared to publicly traded companies, private companies tend to be more focused on domestic activities so their revenue numbers are probably more highly correlated with PCE.
