Economic Disconnect has pointed out what looks to be a glaring error.
He points out the problem as seen here.
It may just be part of the annual recalculation of the seasonally adjusted indexes throwing things off, but even then it looks like a mistake. There's nothing quite like adjustments to adjustments to muddy the picture.
BLS: CPI
UPDATED Each year with the release of the January CPI, seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. This routine annual recalculation may result in revisions to seasonally adjusted indexes for the previous 5 years. BLS made available recalculated seasonally adjusted indexes, as well as recalculated seasonal adjustment factors, for the period January 2005 through December 2009, on Wednesday, February 17, 2010.
Let's look at the raw nonseasonal data and see how accurate it appears. That's all that really matters to those of us tied to the CPI (say investors of TIPS). We are not paid based on seasonally adjusted data. We are paid based on the raw data.
The data can be found here.
Shelter: 247.863 to 247.950
Shelter is composed of the following 4 items.
Rent of Primary Residence: 248.999 to 249.144
Lodging Away from Home: 122.638 to 125.778
Owners' Equivalent Rent: 256.727 to 256.591
Tenants' and household insurance: 123.812 to 124.360
247.863 * ((249.144/248.999)*5.966 + (125.778/122.638)*0.769 + (256.591/256.727)*25.206 + (124.360/123.812)*0.347) / 32.289 = 247.942
That's within the rounding error of the 247.950 that's claimed. At least that data seems consistent.
This is also a possible source for a BLS error and/or confusion for those of us simply trying to make sense of the data and the weightings.
ReplyDeleteEffective with this release of CPI data, the BLS is introducing
several item structure and other publication changes into the CPI.
Shelter. The expenditure weight for second homes will be moved from
Lodging away from home to a new, unpriced stratum under the Owners'
equivalent rent expenditure class. As such, the expenditure class
index for Owners' equivalent rent will now include both primary and
secondary homes, and the title of that expenditure class index will
change from Owners' equivalent rent of primary residences to Owners'
equivalent rent of residences. Both the expenditure class (Owners'
equivalent rent of residences), and the Owners' equivalent rent of
primary residence stratum within it, will be published.
"Change" happens.
I would point out that since the math seems to work perfectly well on the nonseasonal data, then one would think that very same math should work similarly well on the seasonal data.
ReplyDeleteThe seasonal data does therefore seem to have a problem.
Mark,
ReplyDeleteTim and now some others have run the numbers as printed and there is an issue. I think it is important to note but not a big deal; still say the bank "stress tests" were run on the same lax performance??
Yet another dagger in the heart of government stats.
Mark,
ReplyDeletejust saw your comment at TMTGM. So weird how much confusion is out there on a set number deal!
We shall see.
Great work going over everything, I am a math deficient.
GYSC,
ReplyDeleteMistakes happen.
http://news.bbc.co.uk/2/hi/americas/8511910.stm
Those coins will be much desired!
ReplyDeleteMistakes do indeed happen:
http://www.youtube.com/watch?v=baVvz2HJ9bQ
Anatomy FAIL!
GYSC,
ReplyDeleteEpic Anatomy Fail
http://articles.moneycentral.msn.com/Investing/Extra/anatomy-of-a-bank-collapse.aspx
You are slipping Mark, that was too "on topic"! We need funny!
ReplyDeleteGYSC,
ReplyDeleteDid someone say slipping?
This weekend prepare to get annihilated as the Illusion of Prosperity proudly presents a Mega Monster Slip-N-Slide Human Rally! Featuring your favorite!! Speedy Guy On Slide! Don't miss the Ramp of Near Certain Death!! Just 10 bucks! Sunday!!! Sunday!!! Sunday!!! Be here or stay clear!
http://www.youtube.com/watch?v=3wAjpMP5eyo
Gasoline heading above $3 a gallon by this summer
ReplyDeleteBy CHRIS KAHN, AP Energy Writer
NEW YORK – "Retail gas prices likely bottomed out last week, and they're again headed to above $3 a gallon this summer, experts said Monday."
http://tinyurl.com/yk88wyf
According to the article it's China's fault.
Perhaps the Chinese are converting their bicycles to 'Whizzers'?
http://tinyurl.com/ychdo6c
$3 by the summer? It is $3 a gallon now for premium grade here in Massachsuetts! Regular is $2.50. Another stress on the US consumer.
ReplyDeletewatchtower,
ReplyDelete"Gasoline heading above $3 a gallon by this summer"
"...experts said..."
GYSC,
"Another stress on the US consumer."
Another stress on the Chinese consumer too. I should point out that I'm no expert of course.
From 2008...
http://useconomy.about.com/b/2008/03/13/will-gas-prices-reach-4-a-gallon-this-summer.htm
As long as the dollar continues to decline, oil prices will continue to go up.
I think I've seen this skit on Abbott and Costello.
Abbott: Why are oil prices going up?
Costello: The dollar is declining.
Abbott: Why is the dollar declining?
Costello: Oil prices are going up.
Abbott: Why?
Costello: Exactly!
Abbott: Why exactly?
Costello: That's exactly why!
Mark said:
ReplyDelete"...experts said..."
Yeah, but they had bow ties on.
watchtower,
ReplyDeletehttp://www.youtube.com/watch?v=dJXDp_pGrTc
Note the bow ties. :)
Nice!
ReplyDelete