Saturday, May 17, 2008
There are lies, damned lies and then there are statistics
Daily Reckoning: Consumer Price Indexes May Lie
In April, in the US, petrol prices fell 2% says the Fed. Do you remember petrol prices going down in April? We don’t. As we recall, oil prices were soaring…and so was the price of petrol. Something smells funny in the air…a rat. It was largely thanks to this reported drop in prices at the pump that the Consumer Price Index registered a scant 0.2%. We checked the records found the price actually rose 12% in April. How come the Feds put it down as minus 2%? Turns out, they made a ‘seasonal adjustment.’ But turning plus 12 into minus 2 sounds like more than an adjustment; it sounds like either magic or major surgery…like turning a prince into a frog or a fat man into a slim woman. And its not the only prices that the Fed adjusted! Expect to see the same here soon!
4 Comments
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1. alan said...
Am I getting old or were politicians more trustworthy 25 years ago? It seems spin has crept in the front door as integrity departs out the back door.
Maybe Caroline Flint can find a way to manipulate house price indices to make values appear to rise?
2. drewster said...
Alan, you're viewing the past through rose-tinted spectacles. Politicians were ever thus - perhaps not on inflation, but on plenty of other matters. You imply that you're old enough to remember the uproar in 1989 when TV cameras were first allowed into the House of Commons. The public were shocked - they expected to see strident, passionate debate about relevant subjects - instead they saw lazy MPs sleeping off their two-hour lunches and baying like wolves whenever the party opposite spoke. I'm sure there are other similar examples from the past. Fifty years from now, the Blair/Brown era will be fondly remembered as a golden age when children were more polite and things were a lot cheaper.
Anyway, that article relates to the US. Their CPI seems to be even more fiddled than ours!
3. paul said...
Most of the article seems to be about Chile's pension system.
I seem to remember that before it was asset-stripped, Boots plc had a very good pension system mostly because the high risk funds were avoided by the pension trustees. The idea that pension funds can't be built steadily on low-risk funds is a myth peddled by investment brokers.
4. it_is_going_with_a_bang said...
Seasonal adjustment? What the hell is that?
I assume then sometime later in the season there will be an unexplained surge in inflation there based on .... erm..... a seasonal adjustment. Not.