
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, July 18, 1990                   TAG: 9007180408
SECTION: EDITORIAL                    PAGE: A-6   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

BY THE NUMBERS

LIKE A WATCHED pot, the American economy is doing nothing much. It is still steaming, albeit sluggishly. It shows signs of cooling off, depending on what part of the pot you stick a thermometer in. While Wall Street chews its fingernails, government economists wonder: Should the fire be stoked? Or might that cause the pot to bubble over?

No wonder there's so much uncertainty. Those numbers called the leading indicators don't tell a uniform story. Some point up, some down; some just sit there. All this could mean that the economy can't make up its mind. But doubt also is being cast on the validity of the figures used to track economic activity.

An Associated Press story says private economists find many of the federal government's monthly statistical reports seriously flawed. Some of them are so far off that analysts ignore them; they're likely to be revised later on.

"History is being rewritten on a monthly basis," says Allen Sinai, chief economist for the Boston Co. "It makes it very hard for private-sector economists and public policy-makers to come to correct conclusions."

Government statistics can have a ripple effect. Washington at first reported retail sales had fallen by 0.1 percent in May 1989. Then it discovered that the survey had overlooked $1.4 billion in sales. Instant prosperity: The 0.1 percent drop became an 0.8 percent increase.

Meantime, the erroneous report had been picked up in the government's report of the gross national product, which showed a 1.7 percent growth rate during the spring of 1989. Correcting the retail-sales mistake made GNP growth look a lot better, 2.5 percent. But by then, those anemic figures probably had caused many would-be investors to retrench. And policy-makers at the Federal Reserve - fearful that recession was coming - had cut interest rates. Some economists think that the Fed has kept interest rates higher this year to offset that misstep.

Uncle Sam's figures have been suspect for some time - not only in their validity but also in the way they're interpreted. Typically, cost-of-living statistics have overstated housing costs, as if every family bought a home every few months. The government's figures also tend to understate the role of services, as opposed to industrial output, in the economy.

Federal economists aren't happy just to have some kind of numbers to crunch. During the Reagan administration, many of them would have liked to modernize their methods and improve the value of their data. But budget cuts forced staff reductions at statistics agencies, cramped research on sampling techniques, and reduced the amount of information that could be gathered.

The Bush administration has taken a different tack, but last year Congress refused its request for $20 million more for reporting economic statistics. The turndown, said the legislators, was compelled by the Gramm-Rudman law's budgetary restraints. (At Gramm-Rudman time, of course, figures of any kind become balls to be juggled.)

The country deserves, and needs, better. This year the Bush administration wants $50 million to overhaul 25 statistical areas. The money should be provided. If we're to find our way out of our economic and fiscal mess, we need a better road map.

by CNB