Courtesy of Doug Short.
Earlier this week I posted my monthly update on Retail Sales. Those of us who routinely track this series know that the Advance Estimate will be followed by a second estimate next month and a third estimate the month after. How big are those revisions? Are they big enough to warrant skepticism about the Advance Estimate?
Here is a visualization of the cumulative change from the first to third estimates from January 2007 through March 2014, the most recent month for which we have three data points.
As we see, revisions abound, and they move in either direction, although mostly downward during the last recession. For a better sense of the magnitude of the revisions, the next chart shows the percent change from the first (advance estimate) to third (second revision).
During this timeframe there were 39 upward revisions and 48 downward revisions. The absolute mean (average) revision was 0.38%, which breaks down as 0.28% for the upward adjustments and -0.42% for the downward adjustments.
Now, let’s recall the latest 0.3% month-over-month improvement in Advance Monthly Sales for Retail Trade and Food Services. The CB adds a parenthetical (±0.5%)* for that MoM advance estimate. The asterisk is expanded as follows:
| * The 90 percent confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different than zero. [PDF source] |
The Ultimate Direction of Revisions
Actually there’s much more to the Census Bureau’s revisions than the change from the advance to second estimates. We get annual revisions of the series as well. The longer term pattern of revision is quite volatile, but as we can see below in this snapshot of the percent change from the advance estimate to latest revision, it is consistently downward.
The message is clear: Don’t take the advance estimate of retail sales data too seriously.
