Lies, Damn Lies, and Statistics…
Published on June 25, 2010
The government officially released today the retail sales report for the period between January and April of this year. According to the report, retail sales in Puerto Rico increased from $10.297 billion to $11.218 billion, an increase of $290 million, or 2.66%.
At first glance this may look like good news and the government has used it as evidence that the Puerto Rican economy is rebounding from its four year recessionary state. Yet, there are two problems with this Rosy Scenario.
First, the data is calculated using current prices. This means that sale figures are not adjusted to reflect changes in inflation. Indeed, we do not know the current inflation rate for Puerto Rico because the government has stopped publishing the Puerto Rico Consumer Price Index. Therefore, the 2.66% change in sales could be due solely to price increases and not to an increase in actual sales.
Second, gasoline sales account for $217 million, or 74.81%, of the total $290 million increase in retail sales. This increase is due mostly, if not completely, to changes in the price of fuel and not to increased sales of gasoline. This increase, in turn, is driven in large part by the increase in the price of crude oil. As shown on the table below, the average price of the barrel of West Texas Intermediate Crude—the reference price for Puerto Rico—has increased from about $42 at the end of the first quarter of 2009 to $78 at the end of the first quarter of 2010.
In our opinion, the recently released retail sales report is not a reliable indicator of a rebound in the Puerto Rican economy. Intellectual honesty requires, at a minimum, that statistical releases be accompanied with a full analysis of the relevant context. Otherwise, it is just lies, damn lies, and statistics.