More economics misreporting

American Thinker ^ | August 14, 2007 | Steven M. Warshawsky

[Kaslin]

The headline on the Reuters story syndicated all over the world  today is "Wal-Mart Hits the Wall:  World's largest retailer issues bleak forecast, pointing to cash-squeezed customers, higher fuel prices, interest rates."  The accompanying story describes Wal-Mart as "struggling" -- which would carry dire implications for the U.S. economy, because Wal-Mart, which serves 127 million customers every week, "is considered a barometer of the health of the U.S. retail sector."  The clear thrust of the article is that Wal-Mart, and hence the U.S. economy, is in trouble.

Really?  What the article actually shows is that Wal-Mart's second-quarter sales "were $91.99 billion, up almost 9 percent from a year ago."  Moreover, its earnings rose to $3.1 billion, up from $2.08 billion a year ago.  So, in reality, sales and profits were higher than last year.  These are not the financials of a company that is in trouble. 

Yet the takeaway message from the story is that Wal-Mart supposedly faces a "bleak" future.  Why?  Because Wal-Mart was not quite as profitable as "expected" last quarter, and so the company has "forecast" slightly lower earnings for the rest of the year.  In other words, economic predictions are considered more important than actual economic performance in determining the health of the company.  Furthermore, predictions that the company will enjoy slightly reduced profits in the future are treated, in essence, as proof that Wall-Mart is losing money and teeters on the brink of disaster, along with the U.S. economy.

This type of reporting -- which is absolutely commonplace throughout the media -- is deeply misleading, indeed irrational.  I realize that this is the way that much of the business and financial world thinks (especially among those involved in the stock market).  But it still doesn't make sense.  Most importantly, voters should not vote and politicians should not pass laws (e.g., minimum wage increases, price controls on energy, trade tariffs, etc.) based on such wrongheaded economic "analysis.

[ClearCase_guy]

I think that Katie Couric will have 100 million viewers all next week, and that the NYT circulation will top a billion.

And if they don't meet expectations, it could be a sign that the MSM is a dinosaur.

[Frank_2001]

Companies “go private” so they don’t have to deal with this nonsense every quarter. Good idea IMO.

[Fred911]

Gee...and I always thought Reuters was so accurate in their reporting.....they have always been at accurate at least 20% of the time when reporting on Iraq.....

[Fred911]

Gee...and I always thought Reuters was so accurate in their reporting.....they have always been at accurate at least 20% of the time when reporting on Iraq.....

[7thson]

That's great! 8-)

This type of reporting is the same as when they report and the Dems whine that a particular budget is being slashed or cut. And what it actually is a proposed budget increase of 7 percent and someone knocks it down to a budget increase of 3 percent.

[Lonesome in Massachussets]

Most importantly, voters should not vote and politicians should not pass laws ... based on such wrongheaded economic "analysis.

Rots of ruck. In the MSM FDR is still St. Roosevelt, the Beneficent.

[RC2]

Their profits will be much less when people stop buying products made in China. I would guess that over 50% of products on their shelves are made in China.

[bolobaby]

This is the same logic that democrats use when they call reducing the rate of increase to a gubbermint handout program a “cut.”

[Sonny M]

Their profits will be much less when people stop buying products made in China. I would guess that over 50% of products on their shelves are made in China.

I actually think its alot higher then 50% (I'm thinking at least 60% actually), but why do you think people will stop buying stuff from china?

After all the food scares, lead toys and other health hazards being exposed, I don't think there has been that much of a drop or much harm to china's production or exporting.