Minyan Mailbag: A Closer Look at Energy Prices in the PPI
It may be time to call B.S. on the BLS.
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 www.bls.gov 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."
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.
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