Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag: A Closer Look at Energy Prices in the PPI


It may be time to call B.S. on the BLS.


Prof. Depew,

Following up on your Five Things piece yesterday on the PPI, I think it may be time to call B.S. on the BLS. Here is a table summary of unadjusted versus seasonally-adjusted PPI changes for the month of October (data released on website on Nov 14, 2007).

Such a big difference between unadjusted versus seasonally-adjusted numbers required an investigation so I read what the Bureau of Labor Statistics (BLS) had to say, which is the paragraph below, quoted from its website. Bolding emphasis is mine.

"Seasonally adjusted data are preferred for analyzing general price trends in the economy because these data eliminate the effect of changes that normally occur at about the same time, and in about the same magnitude, every year-such as price movements resulting from normal weather patterns, regular production and marketing cycles, model changeovers, seasonal discounts, and holidays. For these reasons, seasonally adjusted data more clearly reveal underlying cyclical trends. Unadjusted data are of primary interest to users who need information that can be related to actual dollar values of transactions. Individuals requiring this information include marketing specialists, purchasing agents, budget and cost analysts, contract specialists, and commodity traders. It is the unadjusted data that are generally cited when escalating long-term contracts such as purchasing agreements or real estate leases."

Please take a second to read it. (I'll wait) ... Bottom line: Seasonally adjusted data is for something called cyclical trends, the unadjusted data (a.k.a. real data) is useful for people that operate in the real world, like people who prepare budgets and make purchases (i.e. actually buy stuff).

Okay, so the BLS actually knows what's going on. It's really the financial media that latches onto the wrong number to report in the headline.

Minyan Rich
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos