Dealing with dodgy data

Weekly Updates

This was a bad week for economic data aficionados (or “geeks” to use the technical term). The UK Office for National Statistics revealed they wrongly added up the numbers in April’s consumer price data, inflating the inflation number. The US Bureau of Labor Statistics admitted measurement errors in the April employment report. The Bureau further announced that it would survey fewer prices when measuring consumer price inflation, and would completely ignore the existence of prices in three US cities.
The increasingly complex and rapidly changing global economy make data harder and more expensive to collect. Survey fatigue and political bias are making things worse. This should not be regarded as a uniquely Anglo-Saxon phenomenon. Just because some statistical agencies do not publicly admit their errors does not mean the errors do not exist.
These errors have consequences. The UK’s inflation error increased the government’s interest rate bills. Less understanding of US inflation increases the chances of the Federal Reserve making a policy error (especially with the mantra of “data dependency”).
In an increasingly sensationalized media environment, reporting can make small changes in data seem important. For investors, it is important to remember that broad trends matter, and data precision is increasingly an illusion.