FSP Retail

FSP Retail Blog

Lies, Damn Lies and Statistics

Posted At : 21 May 2009 15:27

The FT headline last week, “ONS admits to getting its sums wrong with overstated retail sales” initially alarmed me. There has been some grumbling that retail sales as reported by ONS have been too optimistic. Were the critics right after all?

Fortunately, the clue to the solution lay in the first sentence, “Britain's supplier of official statistics conceded that since the financial crisis began in August 2007, it has overstated the volume of retail sales growth by 56 per cent.” First the issue is about retail sales volume, a technical concept understood by very few, and not relevant to retailers or those who receive payments from them. For both parties, it is the amount through the till that really matters. Secondly, an over-statement of 56% is not credible. While the statement is statistically correct, it relates to the difference between growth of 2.3% and 3.6%. The cause of the discrepancy is that ONS has decided to move to using a chain linked index, more suited to a time of market volatility, from the fixed base index used previously. There has been no error in the calculations, just a change in the calculations.

The story illustrates three points. First, as the late Richard Ratner, the much respected City retail analyst, insisted, stick to sales values with no arbitrary adjustments for seasonality. SnapShop follows the same line and quotes unadjusted retail sales figures. It is the equivalent to the weekly sales figures by which most retailers run their business.

Secondly, it illustrates that very little can be taken at face value. Journalists need a good story and never allow the truth to prevent them from telling one. The reader needs to be well-informed to pick out the bones.

Thirdly, FSP makes extensive use of statistics and anything which adds to the “Lies, Damn Lies and Statistics” prejudice is not helpful. FSP will continue to strive to be an objective and informed guide to sorting the wood from the trees. I don’t see much decline in the need for such guides in the foreseeable future.