Thursday, July 08, 2010

Government Statistics

The government is reporting that "retail sales" increased by a 4% last month, the best increase since Moses was a young child. You may get the idea that I am less than overwhelmed. That’s because I know how they come up with that number.

No, they do not collect all of the sales receipts from all of the stores in the nation and run them through their trusty adding machine. Just like they do with unemployment numbers, where people who quit looking for work are no longer unemployed, the government has a weird way of calculating the “retail sales” numbers that it reports.

They use the "same store sales" method, which consists of interviewing a list of stores, all of which have been open for more than one year, and asking them to report their sales relative to last year. Here’s the kicker; any store which doesn’t respond is assumed to have the same sales as the preceding year. They don’t check to see if that store failed to respond because it closed.

So, for instance, Best Buy says that its sales went up 30% and Circuit City doesn’t respond. The government averages that out and says that sales went up 15% from last year. But wait; did you say Circuit City?

Circuit City went out of business and is presently closed. Some of its customers went to Best Buy, which accounts for that company’s rise in business. Some of Circuit City’s customers went to a new business which wasn’t interviewed because it hasn’t been in business for more than a year. Some of Circuit City’s customers just said to hell with it and paid off some credit card debt.

There are lies, damned lies, and government statistics.

1 comment:

bruce said...

like saying a business had an obscene profit margin of 50% (or an increase thereof) when their actual profit went from $100 to $150 - on sales of $100,000. Sheesh. And there is still sluggish if any actual job growth.

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