Retail sales were reported to have risen 0.5% for July over June, up 8.9% year over year. Many cheered the number ex-autos which beat consensus of a 0.3% increase. Economic data is noisy though, despite the fact that even mild “beats”can move markets. Two factors adding to the noise are discussed here: confidence intervals and seasonal adjustments.
Confidence intervals are rarely reported with economic data, even though they are easily understood when reporting a public opinion poll. Retail sales, like other economic data are only estimates (based on a sample of a larger group) and therefore each report has a confidence interval. Retail sales’ confidence interval happens to be +/- 0.5%, meaning that there is at least a 30% chance that retail sales actually missed the consensus estimate of 0.3% in July.
Another factor that significantly changes the interpretation of reported economic data is the seasonal adjustment, which is particularly true for retail sales. Take a look at a comparison of seasonally and not seasonally adjusted charts since ’00.