Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

December 25, 2007
By: Kevin Drum

IN WHICH I PLAY THE GRINCH....I'm twiddling my thumbs for a bit until it's time to hop in the car and head over to my father-in-law's place, and a few minutes ago I came across a piece by Michael Barbaro in the New York Times about "bleak" retail holiday spending this year:

Spending between Thanksgiving and Christmas rose just 3.6 percent over last year, the weakest performance in at least four years, according to MasterCard Advisors, a division of the credit card company. By comparison, sales grew 6.6 percent in 2006, and 8 percent in 2005.

But this isn't right. As near as I can tell (though, naturally, Barbaro doesn't bother to mention it), these numbers aren't adjusted for inflation. In other words, they're useless. Here's what that paragraph should have said:

Adjusted for inflation, spending between Thanksgiving and Christmas declined 0.7 percent over last year, the weakest performance in at least four years, according to MasterCard Advisors, a division of the credit card company. By comparison, sales grew 4.0 percent in 2006, and 4.4 percent in 2005.

I adjusted Barbaro's numbers using annual CPI figures. Alternatively, you could use some other measure of inflation. For example, you could exclude food and energy, which would give you a lower inflation rate but also a smaller spending increase. One way or another, though, you have to adjust for inflation in some kind of reasonable way. Nominal figures are the worst possible way of conveying the correct impression of what's really going on.

Question: why does this happen so routinely? Wages that are up 3% in a period when inflation is running 4% aren't actually up. Spending that's up 3% in a period when inflation is running 4% isn't actually up. This isn't rocket science. Anyone tasked with writing economic news, even on Christmas, should know that spending numbers have to be adjusted for inflation if you want to genuinely inform your readers about the state of the economy. Nominal numbers can be added later in the story if you want to present those too. Why is this so hard?

Kevin Drum 3:22 PM Permalink | Trackbacks | Comments (67)

Bookmark and Share
 
Comments

kd: Why is this so hard?

paying attention and getting it right is always harder...

happy holidays..

Posted by: mr. irony on December 25, 2007 at 3:34 PM | PERMALINK

It's worse than that.
NYTimes.com currently has two conflicting headlines on its website frontpage:

1:51 p.m. ET: Disappointing Sales During Holiday Season
and
3:01 p.m. ET: U.S. Retailers' Holiday Sales Up
[links on my blog]

They rely upon the same data (up 3.6%) from the same source and quote the same "expert" but try to build totally opposite conclusions.

Posted by: Lis Riba on December 25, 2007 at 3:40 PM | PERMALINK

Whoops, forgot that this blog doesn't link our names to our urls like most sites.

It's blogged @ http://www.ribarambles.org/2007_12_23_j_archive.htm#2108110907012603900

Posted by: Lis Riba on December 25, 2007 at 3:51 PM | PERMALINK

There just isn't the motivation to be objective and get to what the "real" story is anymore-it's primarily just laziness. Often you can glean more nowadays from just observing the situation yourself and forming your own imperfect subjective sense of how things are. There were some things that I noticed this shopping season that were different from last year:
1) It seemed that the Sears sales reps on the floor were more unoccupied and a little nervous before the Thanksgiving weekend.
2) It seemed that there were more people in the Mall hallways than in the major stores themselves than last year. People seemed to have less stuff in their hands.
3) Usually the day before Christmas is a complete madhouse and this time it was a little hectic on Saturday, but Sunday and Monday looked like an ordinary weekend at the Mall.
4) Even WalMart seemed the busiest on Friday night, Saturday-Sunday-Monday were like huh?, just like the ordinary traffic you would see on a usual Saturday but three days of it.

Posted by: Doc at the Radar Station on December 25, 2007 at 3:52 PM | PERMALINK

Ah Kevin.

Hmm, an athiest celebrating Christmas. Does not compute. LOL!

Anyway, Kevin, perhaps you haven't noticed that after the Clinton recession that Bush inherited, the economy's been growing like gangbusters. 6 straight years. Lower average unempolyment rate than CLinton. Yes, there are some weaknesses, like housing, but that mainly effects the very well-off as they had more investment in real estate, and it will quickly sort itself out and start heading back into positive territory. THe budget deficit is large, but very small in relation to GDP. In fact, President Bush turned out to be correct when he said that the budget deficit would be cut in half as a percent of GDP after cutting taxes. President Bush keeps getting proved right, and you liberals keep getting proved WRONG! I love it!

Posted by: egbert on December 25, 2007 at 3:58 PM | PERMALINK

Sure, and it's worse than that if you take *per capita* figures (since population is increasing) not just inflation adjusted ones. Kevin, Kevin, most of the reason so much of what you hear is logically fallacious is: It's done deliberately to either help an interest group (typically the plutocracy) or to buck up public confidence for S-FP reasons.

Posted by: Neil B. on December 25, 2007 at 4:00 PM | PERMALINK

egbert: define "growth" in a relevant, non-fallacious way that applied to most people (keeping in mind the very sort of points being made in this thread), keep in mind that the "deficit" is the amount added to the already-huge debt, so lowering that isn't near good enough, that we should even all what was "inherited" from Clinton anything other than a rather good economy, etc.

Posted by: Neil B. on December 25, 2007 at 4:03 PM | PERMALINK

Kevin wrote in the previous post:
"Christmas is here and I'm signing off for the year now."

Kevin! Your enemies like Al and egbert will use such an inconsistency against you in their popular blogs!
;-)

Posted by: Neil B. on December 25, 2007 at 4:15 PM | PERMALINK

Neil: One step at a time.....

Posted by: Kevin Drum on December 25, 2007 at 4:17 PM | PERMALINK

Hey Eggo-
When George Bush finishes destroying the standard of living and the value of people's life savings through awful inflation (its too late to stop it now) and dollar devaluation, we'll have morons like you to thank for it.

Posted by: Raoul Paste on December 25, 2007 at 4:20 PM | PERMALINK

Egbert is spouting nonsense -- cherry-picking, misinterpreting, etc. Enough said; after all, some people still don't "believe in" evolution.

Neil is right; the relevant number would be real per-capita spending. But calculating that would be subject to two sources of uncertainty -- population growth and inflation -- and so they go with the hard number.

The gist of the story is still correct: this number is low. And no wonder, with the generally dismal economic situation of the broad middle class.

January retail numbers are always horrendously low in absolute terms, and so are heavily influenced by seasonal adjustment, and ditto February to a lesser extent; we therefore won't have any more solid figures until the end of winter. But I am not optimistic: housing has dried up as a source of discretionary spending and has become instead a sink, and credit card debt is maxed out and defaults are rising rapidly. Retail -- the prime mover of our economy -- is looking bleak indeed.

Anybody want to take my bet that, even with the distortions imposed by the legerdemain of the financial sector, we'll have some quarters of negative growth next year? Egbert?

Posted by: bleh on December 25, 2007 at 4:21 PM | PERMALINK

"... after the Clinton recession that Bush inherited, the economy's been growing like gangbusters. 6 straight years. Lower average unempolyment rate than CLinton. ..."

Posted by: egbert on December 25, 2007

---------

Instead of the average unemployment number of the Clinton years you should look at how high it was when he came into office and blame Bush I for that. It went from something like 7% down to about 3.75%. During Bush II it has gone up to about 5.75% and stayed there pretty consistently. Also, during the Clinton years the general public made some money. The reason they're not so happy these days is all the profits are going to the uber wealthy. Bush II hasn't been such a great time for the majority of people.

Oh, also, you misspelled 'unemployed'.

Posted by: MarkH on December 25, 2007 at 4:26 PM | PERMALINK

Why is this so hard? It isn't, but most people aren't very good at their jobs. I know that some of those who aren't very good are called geniuses by others in the field, but some people are called genius for the same reason some insects are called centipedes, not because they have 100 legs but because most people can't count beyond 14.

Posted by: anandine on December 25, 2007 at 4:29 PM | PERMALINK

Why does this happen routinely? Because there is no penalty for it happening.

Lazy journalism gets you to the Christmas Party (Happy Hour, home to watch the game, the porn site, ...) that much faster.

Also remember, these were journalism students. They've already weeded out the doctors, physicists, chemists, veterinarians, engineers, and even the lawyers, so you're dealing with some pretty base material. Perhaps a bit better intellectually than the women's studies groups....

Posted by: jerry on December 25, 2007 at 4:32 PM | PERMALINK

Doc notes: 3) Usually the day before Christmas is a complete madhouse and this time it was a little hectic on Saturday, but Sunday and Monday looked like an ordinary weekend at the Mall.
4) Even WalMart seemed the busiest on Friday night, Saturday-Sunday-Monday were like huh?, just like the ordinary traffic you would see on a usual Saturday but three days of it.

I've been wondering, though, if these type of visual indicators may be missing changes in buying behavior.

For example... several of my friends purchased fewer but more expensive gifts such as hi-def TV's, game consoles, iPods, etc., and most purchased these early in the shopping season for fear that stores may be sold out of the more popular items closer to X-mas. An increasing number also are purchasing these pricier items via the web to save sales taxes. So these types of folks would be likely not be doing a lot of the more visible shopping in malls and retail stores.

Similarly, this year I'm hearing more purchases of plane tickets, vacation pkgs, and spa treatments, etc. Are these types of purchases considered in the calculation of holiday sales figures?

Posted by: pencarrow on December 25, 2007 at 4:34 PM | PERMALINK

This link from the big picture blog:

http://bigpicture.typepad.com/comments/2007/12/retail-sales-da.html

It deals with Kevin's gripe and backs him up.

Posted by: Matt on December 25, 2007 at 4:45 PM | PERMALINK

pencarrow, I think there are a lot more people buying (or at least shopping) on the internet than ever, which would tend to reduce impulse buying and reinforce buying on sale because you can cross-compare pricing/features in an instant. That would reduce the amount of traffic at the malls and stores. People also don't have the patience like they used to have with waiting in lines. Bottom line: Plenty of stuff was bought, but it was nearly all heavily discounted.

Posted by: Doc at the Radar Station on December 25, 2007 at 4:48 PM | PERMALINK

Ah Kevin. Hmm, an athiest celebrating Christmas. Does not compute. LOL -Egbert

Egbert, Jesus wasn't born on Christmas day. The celebration comes from the winter solstice. Sol Victus [invincible sun] A pagan celebration which greens were cut down and candles were lit and gifts exchanged. Its about the sun Egbert. You as a christian should know that.

Some 200 financial institutions have gone bust [Jobs lost] and the value of the dollar under Bush has taken quite a hit. Fuel prices have tripled. We borrow from China to finance war. A war NOT in the budget.

Posted by: Ya Know.... on December 25, 2007 at 4:53 PM | PERMALINK

Nominal numbers can be added later in the story if you want to present those too. Why is this so hard?

Because it's deliberate! Why is it so hrd to present YTD numbers for the trade deficit, economic growth, inflation and the like. For that matter, why are rising home prices included in GDP (as 'rent') while rising housing costs are not included in CPI?

Because that would make things look bad, like they actually are?

It has been the general policy of newspapers, economists (presenting to the public) and the government (since 1987 when this really kicked in) to spin out all numbers to present as rosy a picture as possible, on the theory that would result in a "good economy", somehow. Certainly, lot of financial companies are vastly wealthier, on paper, than they were two decades ago.

Welcome to the Soviet Union.

max
['The margin call is going to be hilarious, if you have a vicious sense of humour like I have.']

Posted by: max on December 25, 2007 at 4:55 PM | PERMALINK

Question: why does this happen so routinely?

Does this question really need to be asked at this point?

Posted by: F. Frederson on December 25, 2007 at 5:29 PM | PERMALINK

Matt, thanks for the link to Big Picture. Here's a post from there about parking:

"I work just one block from the toy district. Christmas = toys. Parking rates usually spike just before Christmas peaking around $17-22/day, resettling after the holidays to $6-8 depending on the lot. Every lot is jammed requiring the cars be parked in stacks. It's been this way for the last 10 years.

This year? Parking rates are $6-8. The lots have ample spaces. I'm not seeing parents lugging big bags of toys back to their cars, any where."

That's something I noticed also. I'm usually trying to time when I go to beat extra traffic and to use the least congested way to get into the store parking lots and I .. never had any problem any day I went. Here in the Midwest where I'm at nobody charges for parking because it is so sprawled out, but there were plenty of parking spaces. Nobody was crawling the lots waiting for people to leave.

Posted by: Doc at the Radar Station on December 25, 2007 at 5:31 PM | PERMALINK

The news from the Bush administration has been so evenly bad over the years, reporters hesitate to pile on. Piling on is valid only for the Clintons and other Democrats.

Posted by: Rula Lenska on December 25, 2007 at 6:27 PM | PERMALINK

I hear you, man. I used the same bls.gov data to show my mother that Iowa farmland had exactly the same price (in real, not nominal dollars) in 1910 and 1999: $2,000 an acre in year 2000 dollars.

She still didn't believe me. Iowa farmland as more than doubled in real terms since 1999, driven by the corn ethanol bubble. Once that bubble has run its course, that farmland will settle back down to its century-long stable real (not nominal) price: $2,000 an acre in year 2000 dollars.

Posted by: nemo on December 25, 2007 at 6:46 PM | PERMALINK

Media outlets lie about the state of the economy because they are owned by conglomerates now. Those conglomerates have a vested stake in keeping the economy stable and keeping people out and buying, especially during the christmas season. If people thought that perhaps a serious recession was coming, that the boom was ending, that perhaps the golden age of consumption without equal contribution was over, they might stop spending and start saving and being financially responsible.
Since most companies are not willing to make the smart investments that would allow them to manufacture goods that would be a commodity in other nations (for instance American cars cannot be sold in china because they do not get enough miles to the gallon, etc), those companies rely on American buyers for their profits. The last ten years has simply illustrated that the boom has long been over, and we have been using credit to prop up the current retail consumption scheme, if only to keep the illusion going for another round.
Along with the plutocracy expecting massive profits and enormous and endless money-extracting schemes, we have a corrupt goverment that models it's tax scheme on endless geometric growth of the supplyside market. Combine all of this with a dishonest and highly biased media, which can no longer be trusted with informing the populace with real facts, and you have nothing more then a meltdown of a nation waiting to happen.
Keep this in mind:
1. a successful economy depends on a populace that is prosperous.
2. a continously prosperous populace needs a fair tax rate and a secure and stable and safe environment.
3. In order for a populous to be able to afford to buy goods, they must be employed and paid above the poverty level.
4. For the darwinian concept of corporate competition to in-fact produce better products at better prices, the populace must have a way to exchange opinion of products they have previously bought. the Current model uses only advertising which does not have to be even remotely truthful. The invisible hand has been chopped off.
5. Companies now use production models that finely tune products to either breakdown or become quickly functionally outmoded so that consumers keep consuming, but also keep them just useful enough as to keep consumer loyalty. See Advertising.
Enough for now... Merry Christmas.

Posted by: Aaron on December 25, 2007 at 7:33 PM | PERMALINK

Now compare the sort of insight we get from Aaron, cmdicely etc, with the trash on LGF, redstate.com, the freepers, etc.

Posted by: Neil B. on December 25, 2007 at 8:09 PM | PERMALINK

Just a little nitpicking - if wages increase 3%, no matter what the inflation rate is, that is an increase. That doesn't excuse the laziness (or worse) that fails to immediately follow that statement with a sentence explaining that, due to inflation, there was actually a DROP in purchasing power.
I do think, though, that many people automatically factor in inflation now.

Posted by: Doug on December 25, 2007 at 8:34 PM | PERMALINK

egbert couldn't care less that 40% of all the national debt in our nation's HISTORY has been run up by Bush and his conservative buddies. He also couldn't care less that job creation is WEAKER under W than under Clinton. He is also indifferent to the stagnation of inflation-adjusted income. He just wants to grind his little conservative propaganda ax while our country is sliding into economic catastrophe--a catastrophe brought by people like egbert.

Posted by: Joseph A. Miller on December 25, 2007 at 8:53 PM | PERMALINK

Kevin, you ask:
"why does this happen so routinely?" "Why is this so hard?"
It is intentional. Virtully all articles you can find in the popular media that regard financial information are missing pertinant data points. This is true for national issues and local issues.
To repeat. It is intentional.
I urge everyone but egbert to view the BBC documentary Century of The Self: http://video.google.com/videoplay?docid=8953172273825999151

Posted by: joeis on December 25, 2007 at 8:54 PM | PERMALINK

Hey Drum, how does that crow taste?
http://blogs.dailymail.com/donsurber/2007/12/24/crow-for-christmas/

Posted by: darcy_lane on December 25, 2007 at 9:00 PM | PERMALINK

Didn't I hear somebody say that the energy initiatives in the new energy bill are going to be "bigger than the Manhattan project?"

My first question was - adjusted for inflation? If not, it's again totally meaningless since nominal prices have increased more than tenfold since the time of the Manhattan project.

Posted by: Virginia on December 25, 2007 at 9:07 PM | PERMALINK

darcy_lane has linked to a rightwing Chickenhawk war blog that's saying the "surge" is a success because violence IN A WAR THAT SHOULD NEVER HAVE BEEN FOUGHT TO BEGIN WITH is now down temporarily to 2005-2006 levels. What a crock. It has taken a huge effort by our magnificent troops to keep the lid on this thing. Are we to do this indefinitely? You should see the posts from the pinheads on that blog, btw--the same "Islamofascist supporting Democrat" bullshit we've all grown accustomed to. Darcy just doesn't have either the guts or the honesty to admit that NONE of the premises on which the war was fought turned out to be valid--NONE.

Posted by: Joseph A. Miller on December 25, 2007 at 9:18 PM | PERMALINK

I saw that post, and read a few of the comments. What a foam-flecked fever-swamp that site is! This was my favorite comment left by one of their typical intellectually compromised fuckwits:

Surely you don’t expect him to keep his work? But then stranger things have happened, just not recently from that side of the isle.

Posted by: Blue Girl, Red State (aka G.C.) on December 25, 2007 at 9:28 PM | PERMALINK

The "crow" that the wingnuts want Kevin to eat is apparently found in this assertion at Darcy's link:

The Surge helped Iraq get on its two feet.

So Iraq is back on its feet? Really? Please explain just how this is so. Be specific.

Also, please show the cause and effect between the surge and reduced violence, if that is your contention (and I'm guessing it is because there's no other marked difference in the country from last year that is readily apparent except worse violence in Basra).

Show your work.

Please discuss your answer in terms of all the months the surge was in effect when there was an uptick in violence, please also explain the remarks by wingnuts everywhere including this blog that a surge was of course going to bring about an increase in violence, and then show how the "Anbar Awakening" and a mass exodus of refugees from the country are NOT responsible.

Then when you're finished explaining how more troops are the solution to keeping peace, explain why Bush shouldn't be impeached and/or sent to the Hague for not invading with the 300,000 troops that his generals advised him to do originally, an act of criminal negligence that by your logic has lead to hundreds of thousands of unnecessary Iraqi deaths.

Posted by: trex on December 25, 2007 at 10:01 PM | PERMALINK

From the same article Kevin quotes:

"MasterCard found that online spending rose 22.4 percent, a healthy, if not robust, showing, given fears that Web purchases would slow after a decade of impressive growth."

Are the retail sales separate from the online sales? Is the dip in retail sales compensated by the big advance in online sales? I can't figure out the net from the article, and that would seem to be the most important number.

Posted by: Everett on December 25, 2007 at 10:22 PM | PERMALINK

From Everett at 10:22

"'MasterCard found that online spending rose 22.4 percent, a healthy, if not robust, showing, given fears that Web purchases would slow after a decade of impressive growth.'"

IMHO, it's not a number you should be looking for but a word. Mastercard. Increased spending via credit cards is the current formula for growth. I'm sure several people are willing to speculate that that is because its convenient to use a credit-card to buy online. But I think it's more likely that people are buying online because it's most convenient if your using a credit-card. Correlation is not causation, but I'd thought I'd throw that out there.

Posted by: Aaron on December 25, 2007 at 10:38 PM | PERMALINK

I can't see a 3.6% increase as a decrease. I would deflate it by GDP, which hasn't gone up (I think I don't know the number) by 3.6%. Also it is claimed that gift cards sales are not counted until the gift cards are used, so more and more X-mass sales are being deferred into January. In addition it is claimed that creditcard spending has seen a spike. It would seem to me that the consumers went for one last binge before the debt-crisis brings the party to a tearful close.

As much as I want to tar BushCo with another failure, it does seem that at least temprarily the surge has had some success in the violence numbers. Of course some of the changes were due to change of strategy, and the near-completion of ethnic cleansing in the country. Ascribing the change of the rate to any single cause is more an excercise in propaganda then logical inference. The real issue is are the improvements sustainable? If I look at the three main drivers mentioned: surge/strategy(Sunni-awakening/completion of cleansing, it doesn't look too auspicious: the surge will unwind due to lack of personnel. The empowering of local militias strategy could backfire. Only the ethnic cleansing potential cause offers real hope that the decrease in violence is sustainable.

Posted by: bigTom on December 25, 2007 at 11:20 PM | PERMALINK

Darcey, my Man!

How's that crow tasting, Drum? Did ya have yourself a nice big heaping of Christmas crow?

Libs:

WRONG on Iraq
WRONG on economic
WRONg on global warming

Are you loosers ever RIGHT?

Posted by: egbert on December 25, 2007 at 11:32 PM | PERMALINK

The people in the General Accounting Office who are responsible for determining what the fiscal state of the US government actually is do not seem to see the world thru Egbert's rose tinted glasses.

The opening paragraph of the their August, 2007 update on "The Nation’s Long-Term Fiscal Outlook" states:

"GAO’s updated long-term simulations illustrate that despite some improvement in the annual deficit estimate for this fiscal year, the long- term fiscal outlook remains essentially the same and is clearly unsustainable—ever-larger deficits lead to a federal debt burden that ultimately spirals out of control."

Elsewhere in the report, they basically say that no, we can't simply expect the economy to grow out of this situation by itself.

But please don't take my word for it. You can read the whole report (with varioius alternative scenarios and their effects mapped out) at

www.gao.gov/cgi-bin/getrpt?GAO-07-1261R

Somewhere else---I forget where exactly---I came across the amazing information that the deficits accumulated under Presidents Reagan, Bush I, and Bush II account for ~70% of the USA's ENTIRE accumulated forward obligations since it was founded. Some 50% of the obligations of the US were accumulated under just the two Bush presidencies.

Translated into English, this translates into "Borrow from Future Generations to Spend on Getting Re-elected Now."

Happy Christmas to all.

Posted by: jh on December 26, 2007 at 12:05 AM | PERMALINK

Why is this so hard?

The inflation rate for the period in question isn't known, and may not be estimable at all. From the time I decided what item I wanted to buy (September) until I bought it (December) the price of the item declined 12%. Other items in its class had similar declines. For me, the purchasing power of my dollars increased rather than decreased. According to the NYTimes article quoted, decreases like that were common for the interval of time reported on. Consequently, the 3.6% increase came in the face of steep discounting, otherwise called "deflation".

I am going to buy a multiprocessor computer in the spring, sooner if I need it sooner. By the time I buy it, its cost will have declined 25% since the first computers in its class were shipped. That won't be reflected in national level inflation statistics.

Not everything is so nice. Gasoline has been fluctuating in price for months without declining.

Still, the main point is that the actual inflation rate for the last quarter of 2007 isn't known yet.

Posted by: MatthewRmarler on December 26, 2007 at 12:07 AM | PERMALINK

MatthewRMarler may be right about not having inflation figures for the current month, although a reasonable guesstimate can be made that would certainly come close for the last quarter, but, of course, we are talking Christmas to Chnristmas. And we can certainly come close on that.

The argument about individual articles performance is somewhat fallacious. The cheapest car today is way, way cheaper than a Model-T, and outperforms it in every way. Computers and washing machines have gone the same way, but we have an expectation of this improvement which would be better reflected in productivity gains or lower gas use than trying to guess the actual value of his satisfaction in greater utility.

The only time Japan, Western Europe and the US were really concerned about inflation indexing, in my memory, was during the '70s and '80s when a convergence of commodity price rises, countries' monetary policies and the oil price shock pushed inflation rapidly upwards over a number of (mostly) stagflationary years. Indexing and awareness of inflation then became of interest to corporations as well as the poor stiff trying to negotiate a fair wage.

Low inflation means the stiff gets suckered and corporations, necessarilly working at higher sophistication and accouting awareness, constantly adjust their planning with present and future in mind. Why would they want consumers to be aware of that.

Finally, here's a novel idea: keep "volatile" items' in the index but use a six-month moving average to smooth them. What could be wrong with that rather than having a totally disengenous figure published?

Posted by: notthere on December 26, 2007 at 12:35 AM | PERMALINK

I can only comment on the difference in the financial circumstances of my family since the end of the Clinton years. In 2000 our modest investments were doing well and our income allowed us to be very generous with our extended family and friends. Our house was worth enough that we viewed it as a major factor in our retirement fund. Now, although electronics cost less- as pointed out by MatthewRmarler- the necessities like utilities and groceries are much more expensive. Our retirement fund has tanked and our house isn't selling even at a very reduced price. We decided to forgo Christmas presents this year, so we haven't been competing for parking spaces. I thought I had retired, but I need to start looking for a job. BTW unemployment figures don't include people like us!

Posted by: Rose Weiss on December 26, 2007 at 1:05 AM | PERMALINK

Information is not ideal. Most people understand what inflation is, but not that nominal figures mask its effects. A better analysis of current economic metrics from the NY Times should be expected, so asking why they routinely do not convey such basic information is more than just quibbling. The NY T has incompetent business news writers or it deliberately misinforms or it is a xmas-time story reporting just the facts without decent editing by anyone economically informed.

I would guess it is deliberate with an inexperienced skeleton holiday staff excuse.

Posted by: Brojo on December 26, 2007 at 1:07 AM | PERMALINK

From the time I decided what item I wanted to buy (September) until I bought it (December) the price of the item declined 12%.

Matthew, keep in mind that inflation rates and economic statistics are not about you. Rather, they are an aggregate of a package of different goods, and the issue is not the Sept to Dec price but the Dec to Dec prices. Now could you please explain how your contribution was relevant? There's no requirement to post here. If you can't make an informed comment, please refrain from doing so.

Posted by: Tyro on December 26, 2007 at 1:46 AM | PERMALINK

Must be more to Christmas than a collective media death watch to see if retailers make good enough profits. Maybe Charlie Gibson could mix it up with some more medical segments on breast cancer. Seems we never get enough of those.

Posted by: Luther on December 26, 2007 at 1:50 AM | PERMALINK

[OT]: Expanded coverage of this recent revelation, including a discussion of comparable schemes concocted under subsequent presidential administrations, including (of course) the current regime:

FBIs Hoover proposed internment of 12,000 "disloyal" Americans in 1950
Blueprint for police-state rule
By David Walsh [WSWS News]
.

Posted by: Poilu on December 26, 2007 at 4:17 AM | PERMALINK

Funny that Egbert can't spell loser ("loosers").
After all, I'm sure he hears it often enough.

Posted by: Joseph A. Miller on December 26, 2007 at 4:48 AM | PERMALINK

I don't trust any economic numbers that are reported any more - they have all been jiggered and manipulated. That's what happens under fascism.

Talk to a blue collar worker - the American economy sucks and is rigged to benefit those who already have wealth. That's all you need to know. We need a revolution in this country, that will shake the status quo down to it's roots...

Posted by: The Conservative Deflator on December 26, 2007 at 6:06 AM | PERMALINK

Hey, at least Western oil company good money even if retailers got screwed.

Deregulation of big oil, every other huge corporation - cost everyone more money, not less.

Posted by: me-again on December 26, 2007 at 6:48 AM | PERMALINK

The Conservative Deflater @6:06 am

"Talk to a blue collar worker - the American economy sucks and is rigged to benefit those who already have wealth. That's all you need to know. We need a revolution in this country, that will shake the status quo down to it's roots..."

America has not seen true civil disorder yet. In the revolutionary war, patriotism kept violence focused on foreigners and in the civil war, the violence was concentrated in large armies kept more or less under the control of officers. Except for certain exceptions, most civilians did not fight each other.
Should we have a true class war/revolution, it would be very violent and bloody. We could expect to see the kind of internecine violence of the Iraq civil war model, with a dash of the french revolution thrown in. Very hard to close that can of worms once opened. Should the present model of cash extraction continue, such a war becomes at some point not a possibility, but inevitable. Additional issues such as global warming, resource depletion and overpopulation will aggravate the matter also. Some stopgaps and ways to forestall the coming violence include but are not limited too: Environmental awareness, adjustment of current industrial resource consumption, population control(most important) and new laws to separate corporation from state, and corporation from media. These imperatives will directly affect our children's survivability in the coming crisis' in future times.
Merry Christmas

Posted by: Aaron on December 26, 2007 at 7:08 AM | PERMALINK

aaron: Those conglomerates have a vested stake in keeping the economy stable and keeping people out and buying, especially during the christmas season.

true...but..its not just at xmas....

even during snowstorms...

advertisers don't want consumers to be urged to "stay home"...

unless emergency officials say so...

Posted by: mr. irony on December 26, 2007 at 7:21 AM | PERMALINK

I completely agree mr. irony. I was simply pointing out that a holiday in which gift-giving is just one part has been completely distorted over time by corporate advertising techniques. Many many years ago, when families got together, they would buy/make just a few gifts for each other, many of them hand-made. Now we create an overpoweringly large bubble in our own economy one month a year, and even have a 'black friday' to go with it. Even conservatives wouldn't hesitate to point out that Christmas was supposed to be about celebrating the birth of Christ. But in your average family's event, how much time is devoted to gift opening instead of celebrating the birth of Christ? (I use this just as one example) We as a nation are hypnotized by money instead of prosperity. Those two items are not necessarily mutual inclusive.

Posted by: Aaron on December 26, 2007 at 7:41 AM | PERMALINK

aaron....i agree...my comment was not a criticism.

aaron: Now we create an overpoweringly large bubble in our own economy one month a year, and even have a 'black friday' to go with it.

black friday and whether shoppers are spending or not...are SIMPLE stories...

1...go to a mall and talk to people...how hard is that?

2....whatever you find...is true...for that moment...so you don't really have to know anything about economics..

even then be careful...advertisers don't like media that rock the boat..

meet you at the bar...after the cast...

Posted by: mr. irony on December 26, 2007 at 7:54 AM | PERMALINK

When talking about Xmas sales by the major retailers the correct deflator to use is the deflator for GAFO retail sales. This is for department store type goods and includes furnishings, electronics, clothing, sporting and hobby good, office supplies, etc.

As of October the year over year change in this index was -2.63% and it has actually declined every year since 1993.

Using this index the 3.6% nominal increase you are discussing actually is a real increase of about 6% -- still need to get a couple of months data to be exact.

Posted by: spencer on December 26, 2007 at 9:40 AM | PERMALINK

In real terms GAFO sales were up 8.5% in December of the prior two years.

So we are seeing a significant slowing of real Xmas sales, but it is not a disaster by any means.

Posted by: spencer on December 26, 2007 at 9:44 AM | PERMALINK

Because the gov't and the corporate media lie to us:

http://www.shadowstats.com/

Posted by: Speed on December 26, 2007 at 10:15 AM | PERMALINK

Thank God fighting WWIII hasn't hurt our consumer spending boom! Back when the Democrats ran World Wars we always had crummy stuff like tax hikes, rationing, war bonds, no new cars being made, the draft, and stuff like that!

But our great leader has shown that America can still kick a country's ass in order to save it, AND we can go on enjoying the American Way of Life at the same time! Surely, it is God's will that we show those 1 billion Mohammedans how the Lord has favored us with the Highest Standard of Living the world has ever seen!

Posted by: Wingnut on December 26, 2007 at 10:24 AM | PERMALINK

I predict that the Dow will hit 30,000 by next December, and that after a few minor adjustments in the housing market, the economy will hit ever greater and greater heights, and will never stop growing, and we'll all live happily ever after (except filthy atheists and liberals), and the oil will never run out, and Republicans will win every election...

Posted by: Egbert on December 26, 2007 at 10:27 AM | PERMALINK

Many reporters are innumerate. Many others have decided their readers are not capable of understanding the notion of inflation-adjusted numbers and so don't include a discussion about them.

Still others, like Fox News reporters, will pass along any defensible numbers that appear to bolster policies advocated by the Bush Administration.

Posted by: pj in jesusland on December 26, 2007 at 11:36 AM | PERMALINK

By coincidence, while I was reading this post, Headline news was on with a story claiming that the business season my yet be saved because of billions of $ in gift cards that were going to be spent in the near future. I don't know how that is counted (when the card was bought, or when the actual gift is bought) but I think it is right that more gift cards are being given. I don't know if it is enough to make a difference though.

Posted by: Patrick on December 26, 2007 at 12:59 PM | PERMALINK

Tyro: Matthew, keep in mind that inflation rates and economic statistics are not about you. Rather, they are an aggregate of a package of different goods, and the issue is not the Sept to Dec price but the Dec to Dec prices. Now could you please explain how your contribution was relevant?

In the report that Kevin Drum cited there were reports of many other shoppers doing the same as I, as prices were discounted throughout the total shopping season. The only advantage of my example was that I knew the exact amount of the decrease in this particular item (12%), and I knew that other items in the class (some more expensive, some less) had similar price declines over a similar interval. Since prices were declining consistently for many items widely purchased during the largest retail quarter of the 2007 year, the actual inflation during that quarter is not known.

And, as you note, the aggregate statistics do not apply to everyone. I am by no means unique, and there are millions of people about whom the aggregate statistics are uninformative. You can not conclude from the quoted statistics that anyone is actually worse off, or better off by less than 3%, or any of the other qualitative conclusions that you would like to reach. Hundreds of thousands of items that are bought in bulk are cheaper this Christmas than they were last Christmas, but the price declines have not yet be included in inflation statistics because this year's purchases are too recent.

the really important items in the inflation increase this year are fuel and food. As far as I know (you can direct me to recent reports) the rate of inflation in food and fuel over the last 3 months isn't known.

Posted by: MatthewRmarler on December 26, 2007 at 1:18 PM | PERMALINK

notthere: Finally, here's a novel idea: keep "volatile" items' in the index but use a six-month moving average to smooth them. What could be wrong with that rather than having a totally disengenous figure published?

In fact, there are quite large volumes of numbers published, and available for any one to read about. For popular reporting, some small selection of the numbers is necessary to write a story of finite length, with references to information in greater detail. Your point is a good one, but I would add that readers need to pursue more information, and not have an exectation that the best source will always have the best numbers.

Posted by: MatthewRmarler on December 26, 2007 at 1:26 PM | PERMALINK

as far as I know (and I do follow recommendations for further reading), these housing price declines have not yet been included in calculations of the inflation index.

http://www.breitbart.com/article.php?id=D8TP7G6O0&show_article=1&catnum=0

the housing bubble was bad, a loss of considerable potential investment, but bubbles happen in free economies and there isn't much use pouting over them. They are bad. The bursting of the housing bubble is the start of correcting the problem this time. For some it means a loss of apparent wealth, but for others it means that they can buy better housing this year than before.

Posted by: MatthewRmarler on December 26, 2007 at 2:37 PM | PERMALINK

Marler, I know somewher inside you you just can't help being perniciously deceptive.

As stated we are looking at 12 month inflation, and, although we don't know "the rate of inflation . . . over the last 3 months" (obviously, because we don't have the present month's) we do have November's and October's and the prior 9 months. December's rate of change would have to be aberrant to significantly affect the year-on-year rate.

Similarly, there are plenty of economists able to make pretty close estimates for December, and you could go here, if you really wanted to look up energy and food inflation through November. But why make any substantive point?

And again, in the past, housing was normally seen as an investment, yet, in the near years, the bubble was directly encouraged by the administration and the Fed as a source of income to keep the economy afloat and as another way, yet again, to transfer wealth to those who are willing to fill the party coffers.

And there's nothing about bursting bubbles and, as we have seen, their subsequent discontinuities to the economy that wouldn't be better handled by intelligent and more conservative financial foresight and practices.

And surely you are then contributing to maintaining inflation if you do not continue to wait to buy your computer until the price stops falling.

No. Of course not.

But you really know all this, don't you? It's become the modus operandi of an inherently dishonest clique and you just follow their example.

Posted by: notthere on December 27, 2007 at 12:19 AM | PERMALINK

notthere, you make an excellent point regarding Fed encouragement of the bubble and contributions to Republicans from the wealthy.

It went kind of like this:

1) Tax cuts to wealthy.
2) Feds encourage investment in real estate as a destination for the extra income now available.
3) It's all wine and roses until the bubble bursts.
4) Democrats are now beating Republicans in fund raising, a highly unusual state of affairs.

#4 could be happening for several reasons, but two are certainly 1) that wealthy folk who normally contribute to Republicans are worried about their financial health and not letting go of their cash, and 2) the Republican's normal constituency has woken up and decided to not support them anymore.

Posted by: Greg Barton on December 27, 2007 at 12:25 PM | PERMALINK

By coincidence, while I was reading this post, Headline news was on with a story claiming that the business season my yet be saved because of billions of $ in gift cards that were going to be spent in the near future. I don't know how that is counted (when the card was bought, or when the actual gift is bought) but I think it is right that more gift cards are being given. I don't know if it is enough to make a difference though.

What? The money transfer is made when the gift card is bought, not when it is redeemed. And all those gift cards were bought during the shopping season.

Unless I am missing something about the way gift cards are accounted for, and that is absolutely possible, I cannot see how that would save anything.

Posted by: Joshua on December 27, 2007 at 1:20 PM | PERMALINK

Apparently gift card sales are not included in retail sales figures until they are redeemed.

Wonder why the blogosphere has grown so, why we are willing more and more to listen to "amateurs" when it comes to deciphering the news? Here's a great example. The twits on MSNBC and CNN never bother to analyze the news--they pretty much just "report" glorified press releases.

How about this for analysis--whether valid or not? In this increasingly fragmented society, where we don't watch or listen to the same things anymore, where people are pulled in a million directions, my experience is that gift cards have exploded in popularity and in acceptability as a gift. People are now getting credit, if you will, for knowing which store you like to shop in, as opposed to what color sweater you want.

According to Bloomberg, gift card sales are up to $20 billion this year--and now account for more than 11% of sales.

I wonder what the numbers would look like if we added the increase in gift cards to the retail sales figures. Who knows? Not me, but then I'm not a professional business journalist. But what if gift cards pushed Christmas sales over 3%-- would that make it a good year? 3 1/2%?

Posted by: Tony Iovino on December 29, 2007 at 10:32 PM | PERMALINK

Gift Cards - which by the way are a huge pain in the neck for retail - can not be counted until they are used because there is no way to know until then whether they result in a net gain, wash or even loss for the company. The company has this huge pile of cash sitting there in on their books but no way to know yet if the money will translate into merchandise that was purchased at full price with a huge profit margin to log on the books, or horrors of horrors something so heavily discounted that the store has to write it off as a loss. Gift Cards are huge this year and stores are hoping that those cards will be used as mad money by shoppers who care nothing for the price, resulting in a huge profit uptick next quarter. But it is also possibilbe that nervous shoppers may try to make those gift cards go as far as possible and retailers may find those cards turn into a net loss for them.

Posted by: DFE on December 30, 2007 at 11:03 PM | PERMALINK




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly