Global Investing

The magic of seasonal adjustments: You’re paying less for gas

May 14, 2008

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Been paying more at the pump lately? Not to worry. It’s just a figment of your imagination, new government data shows.

The U.S. Department of Labor’s Bureau of Labor Statistics tells us that gasoline prices fell last month by 2 percent. This was the very same month when crude oil prices surged 11.7 percent and there was NO pass through at the pump? Hmmmm.

Meanwhile, another branch of the very same U.S. government, the Department of Energy’s Energy Information Administration, contends average retail gas prices actually shot up 9.5 percent in April from March. Whoa!

Why the discrepancy?

It’s the magic of so-called “seasonal adjustments” — a practice employed by economists and other statisticians to smoothe out volatile month-to-month changes and give a supposedly clearer picture of the underlying trend within the numbers.

A look at the non-seasonally adjusted data from the BLS is closer to reflecting reality: It shows gas prices rose 5.6 percent last month.

Better, but that still understates the increase recorded by the EIA by 41 percent. Makes you wonder where the BLS buys its gas.

Comments
7 comments so far | RSS Comments RSS

Well, thanks for putting that in writing. I bet the same magic operates elsewhere, isn’t it ?

For the time being, the market seems to believe these adjustements. Or to fail understanding what this means.

I have no idea where the BLS buys its gas, but I fear it’s borrowing some ideas from Orwell’s Ministery of Truth…

Posted by Philippe | Report as abusive
 

The US government “unemployment” numbers in addition to
other “official” statistics are similarly grossly flawed.

It is SO bizarre….but, then look who we have in the
White House, calling the shots with regard to economic
“non”policy, “non”diplomacy, etc.

God help us all….

Maybe things will change after November elections.

Posted by iheardthisbefore | Report as abusive
 

Any time I read the words ‘seasonally adjusted’ its time to turn the page, fast. The Bureau of Labor Statistics also perps a fiction of ‘core inflation’ at 2.4%, which EXCLUDES food and energy prices. The overall rate is about 4%! Lets get this straight, these ivory-tower types don’t use food-on-the-table or gas-in-the-tank prices to add up their bogus numbers! They should be made to visit a real supermarket every week and fill their own ga$ at the self-serve. If we put a BS detector (telescreen) in those offices, the battery would die inside of an hour.

Posted by Bill | Report as abusive
 

leave it to ‘economists’ >> up is down and down is out. actually they do this with many other things — they call them “adjustments”. One that still has me in awe is their ‘hedonic’ pricing adjustment. I cant believe it – if anyone has some info please share: A $2000 PC toay performs just as well (MIPS etc) as a $200K minicomputer did 20 years ago; so the economists think that the $2000 PC is really ‘worth’ a $200K minicomputer. That is how we get all messed up.

Posted by azmat | Report as abusive
 

I am paying $4.25 a gallon, and have been paying over $4.00 for a few months. I live on Maui, in Hawaii.

 

And according to ‘seasonally adjusted’ energy prices, there would be a ‘seasonally adjusted’ food and durable goods prices, commodities prices are soaring, it’s the way to a global recession.

 

Finally people are writing about what everybody knew a long time ago. But it shows how ridiculas US stats actually are – have you noticed at the way everything that points to higher inflation/ unemployment or lower productivity is smoothed out? Luckily my wages/salary is not set by the goverment’s inflation figures. By the way – not all economists smooth out the numbers. http://www.onemanstanding.com

 

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