One of the things that I used to do with great regularity, until I felt like I was beating a very dead horse, was to break down various government economic reports to reveal the various ways statistical tricks are used to torture the data into more pleasing forms. Which is a kind way of saying “fib to ourselves.”
I wish I could report that I stopped doing this because some measure of sanity had returned to our economic bean counters and that our economic numbers were once again useful and at least roughly accurate. Sadly, I gave up, because, if anything, they are more deeply-compromised and useless than ever.
Still, I think it is helpful to review the tricks every so often, so that we maintain an appropriately healthy skepticism of these falsified numbers.
Month after month, the Census Department has been steadily reporting increasing retail sales, even as state sales tax receipts have continued to decline. One of these two measures is dreadfully wrong. I trust sales tax revenue, which is simply counted up, far more than I do government estimates of retails sales, which are sampled, adjusted, and massaged into new and exciting shapes.
In January, the government reported that retail sales had vaulted unexpectedly higher by a very robust 0.5%, causing the stock market to react with glee. One of the tricks used by the government, which I happen to call “Beat by a penny!” works like this: Some economic report is announced as having beat the consensus economic estimates, which causes various asset markets to respond in ways generally considered favorable by politicians and Wall Street types. Then, later on, the remarkable gain is quietly reduced, often to a level well below the consensus estimate. But at that point, it is a month later, and the stock market never takes notice of that “old” data, focusing instead on this month’s surprising “Beat by a penny!” number.
Here’s this month’s version of this game:
In a Surprise, U.S. Retail Sales Rose in February
February was hardly an ideal month for retailers: snowstorms blanketed many parts of the country, and car dealerships faced an uproar over safety concerns. But sales for the month rose solidly, the government reported Friday, raising hopes that Americans were growing more confident about the economy.
by kenc