Agreeing to disagree

This is a post I wrote several weeks ago. It's a must-read just because no one in the mainstream media is interested in carrying it. So I must be saying something right.

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Last week, the business press was abuzz in reaction to the newly-released retail sales statistics. Everyone agreed that (1) retail sales went up 0.3 percent month to month and (2) this statistic proves a sign of economic recovery and/or the resilience of U.S. consumers. Here are a sampling from the usual suspects:

Associated Press

• Headline: Retail Sales Post Surprising Gain in February
• Lede: Retail sales posted a surprising increase in February as consumers refused to let snowstorms stop them from stepping up purchases for everything from clothes to appliances. The improvement provided hope that the recovery from the Great Recession is gaining momentum.
• Data: For February, sales rose 0.3 percent, the Commerce Department said Friday. That surpassed expectations of a 0.2 percent decline. (paragraph 4)

Wall Street Journal

• Headline: Shoppers Buck Snowstorm to Push Retail Sales Higher
• Lede: U.S. retail sales posted a surprising gain in February despite falling car demand amid trouble at auto maker Toyota Motor Corp. and fierce blizzards that crippled the East Coast for days.
• Data: Retail sales rose last month by 0.3%, the Commerce Department said Friday. Economists surveyed by Dow Jones Newswires had forecast a 0.3% decrease in February sales. (paragraph 1)

Washington Post

• Headline: Retail Sales Up Slightly in February, Despite Nationwide Snowstorms
• Lede: February's cross-country snowstorms couldn't freeze out consumers as retail sales rose 0.3 percent for the month, according to government data released Friday. The increase was higher than many analysts had expected considering that almost every state had snow on the ground at one time last month. ...
• Data: ditto (paragraph 1)

Time

• Headline: A Hopeful Economic Sign: February Retail Sales Jump
• Lede: Despite blistering snowstorms and a dip in consumer confidence, retail sales rose strongly in February, signaling that recession-weary shoppers may finally be opening their wallets. Yet experts quickly noted that consumers have not convincingly abandoned their penny-pinching ways and likely won't for a long time.
• Data: Seasonally adjusted figures released by the Commerce Department on Friday show U.S. retail and food-services sales rose 0.3% from January and 3.9% from a year ago. (paragraph 2)

CNN Money

• Headline: Retail Sales Beat Expectations
• Lede: Retail sales rose in February, the government said Friday, surprising economists who expected a decline.
• Data: The Commerce Department said total retail sales edged up 0.3% to $355.5 billion last month. Economists surveyed by Briefing.com had anticipated that February sales would drop 0.2%. (paragraph 2)

Business Week/Bloomberg

• Headline: Sales Rise as Buyers Overcome Snow, Job Concerns
• Lede: Americans braved blizzards and overcame job concerns to propel retail sales in February, pointing to a broadening in growth that will help sustain the expansion.
• Data: Purchases unexpectedly climbed 0.3 percent, the fourth gain in the past five months, Commerce Department figures showed today in Washington. (paragraph 2)

New York Times

• Headline: U.S. Retail Sales Rose in February
• Lede: February was hardly an ideal month for retailers: snowstorms blanketed many parts of the country, and car dealerships faced an uproar over safety concerns.
• Data: The Commerce Department retail sales increased 0.3 percent from January, much better than the 0.2 percent decline Wall Street analysts had forecast. (paragraph 3)

The NYT was sufficiently impressed to designate 0.3 as a "prime number". 

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Everyone agrees about the number and what it means. So many media outlets, one echo chamber. But...

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No one agrees with the Census Bureau, the source of the data. Here are the salient parts of their press release:

Headline: Advance Monthly Sales for Retail Trade and Food Services

Lede: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for ..., were $355.5 billion, an increase of 0.3 percent (+/- 0.5%)* from the previous month and 3.9 percent (+/- 0.5%) above February 2009.

* The 90 percent confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

(Also of note, the estimate for the percent change between Dec 2009 and Jan 2010 was revised down 0.4 percent, larger than the supposed change in Feb 2010.)

What they released was an "advance estimate" based on a small subsample (5,000 firms) of the usual sample used to estimate these statistics. If the conventional 95 percent confidence level were used, the margin of error would have been even wider.

So, our journalists agree with each other in disagreeing with the Census Bureau.

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In the second-to-last paragraph of the release, the Bureau statisticians warned:

individuals using estimates in this report [should] incorporate this information [about margin of error] into their analyses, as sampling error could affect the conclusions drawn from the estimates.

Maybe they should be more direct: the 0.3 percent number is likely pure noise.