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There’s More Than One Story to the Statistics

April 8, 2010

Consumer confidence, jobless rate, existing home sales, manufacturing, CPI, PPI… just about every day a body of experts or analysts releases a statistic that indicates the state and health of the economy.  These statistics, numbers and findings are no doubt a helpful indicator for where the economy stands and the direction it might take.  However, just as a picture is worth a thousand words, statistics tell more than one story.  Consider the following example:

According to a report released by the Federal Reserve on March 11th, “Total U.S. household debt, including mortgages and credit-card balances, fell 1.7% in 2009 to $13.5 trillion…the first annual drop since records began in 1945” (Americans Pare Debt, The Wall Street Journal, 3/12/10).  At first glance, it would appear that consumers are paying down their debts, especially when considering that consumer spending was (.6%) and the personal savings rate was 4.3% in 2009 (BEA.com).  Sounds like a good story at face value.

Well, the second story is not so positive.  The majority of debt being shed by consumers is occurring through defaults on mortgages and other obligations—evidenced by the estimated $200B in mortgage debt written off by banks and investors in 2009 (Americans Pare Debt, The Wall Street Journal, 3/12/10).

When considering any statistic, understand the real story behind the numbers and ask yourself:

  • What is this telling me?
  • What is this not telling me?
  • Why might the number have changed?

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