“Frankly ridiculous” was the Goldman Sachs assessment. Bizarre!” said Sir Philip Green.

Yes, we’re talking about those surprise retail sales data. And they were a surprise, creating quite a buzz around the office (although Theo Casey remained relaxed, for reasons he reveals below…).

Now apparently — if we believe the Office for National Statistics (ONS) — retail sales volumes jumped by 3.5%.

The thing is, not everyone does believe the ONS. From investment bankers to the boss of Sainsbury’s, they’ve been queuing up to give the ONS a kicking!

“The ONS doesn’t appear to understand how people shop,” said Justin King, chief executive of Sainsbury’s. “These figures are based on a small basket and exclude promotional activity.”

Writing in the FT, Delphine Strauss disagrees:

“The surge was not due to retailers cutting prices. Sales values rose 4 per cent month-on-month.”

Others have claimed unusually warm weather was behind the strong figures.

But do we actually believe these figures? And does it matter if we don’t? Do we need to worry about numerical squabbling?

As retailers, Philip Green and Justin King have professional motives in raising an eyebrow. But I don’t. I’m sceptical for my own reasons.

None of the coverage I’ve seen really looks at how these figures are calculated. Probably because to do so is tedious and dull. So I’ll spare you all the gory details, and stick to a very brief overview of how the ONS comes up with these numbers.

Basically, it surveys 5,000 businesses. All the big ones, plus a “representative sample” of smaller businesses. At this stage it has to make a judgment on what is representative.

Then it looks at the value — not the volume, note, the value — of sales for a month. Now, these figures are vulnerable to inflation. If everyone buys all the same stuff, but at a higher price, the value of sales will automatically go up. (I realise it’s unrealistic to assume people wouldn’t change what they buy when prices change. But let’s roll with it. We’re playing economist for the moment).

The ONS gets round this by using what’s called a deflator. This is an economist’s way of ‘stripping out’ price rises. But this is another stage where a whole raft of assumptions needs to be made. Which inflation measures to use? How to weight them? These are subjective, not objective, judgments.

After performing this adjustment, we’re left with the change in sales value, minus the effect of price changes, giving us an estimate of sales volumes.

And, apparently, those sales volumes rose 3.5% last month. Now, I’m not saying this figure is “wrong”. The truth is, I don’t know. No-one does. It’s an estimate. The product of assumptions. It’s useful as a guide — but only if you approach it with caution.

Some would say that, as this is the best we have, shouldn’t we just go with it? Who am I to criticise without offering an alternative?

But this is the point — we can’t model the world with absolute precision. It’s folly to think we can.

Never trust an economist who appears to have too much faith in numbers. If I ever succumb to the lure of apparent precision, make sure you write in and tell me! I’m only human, and liable to err…

Each new figure gives us a little piece of the puzzle, and taken together they can point the way. Just don’t get tangled in the numbers…

Perma-optimists (e.g. the Government) will seize on these retail data as evidence that things aren’t so bad. But the Big Picture tells us a different story.

The good news is you don’t need to worry about this or that economic report. About this or that headline… about the push-and-pull between ‘bad data’ and ‘good data’.

Because we can take a step back from all that. We can look at ALL the pieces of the puzzle. We don’t have to get bogged down in meaningless forecasts from meaningless economists.

Despite the rosy retail data, then, our prognosis for the economy remains bleak. One spreadsheet does not a recovery make — especially not if it’s loaded with ‘assumptions’.

The big thing gold investors need to look for

We have another dispatch from our Miner Diarists Erin and Isabel.

Some of the biggest names in gold mining have seen their share prices slip. It’s not just down to the price of gold, either — which has slipped since it breached the $1,000 mark earlier this year.

“Costs are key,” says Isabel. “Rising costs have been knocking miners about.”

Today, Erin and Isabel take a look at how some key mining players have been affected — and ask what does the future hold?

“Figures are like a bikini”

Like me, emerging markets-watcher Manraaj Singh is wary of numbers. Except he likens them to swimwear:

“Figures are like a bikini,” he says. “What they reveal is suggestive, but what they conceal is crucial.”

Regular readers will know that Manraaj is bullish on Vietnam. But the country’s trade deficit is giving some commentators cause for concern. Should investors be worried?

“Not a bit of it,” says Manraaj. “Look at what they’re actually importing. Material and equipment to build roads, factories and other infrastructure. In other words, to grow the economy.”

Manraaj’s Vietnam play is one for the hard core contrarians. If that’s you, then check out why Manraaj believes you should buy in right now!

The dollar and the euro are about to go to war…

The world’s two leading currencies are about to do battle. And European experts at Morgan Stanley have warned that a currency crisis could be in the offing.

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