As a former statistics teacher, I know how easy it is to lie or mislead with statistics.

There were a couple of articles making headlines this week that give us the chance to make the point that we must look behind the headline statistics to get a clearer picture of what is going on.

In terms of May inflation at 5% year-over-year, we must discuss the “base effect.” The graph below from the New York Times article on the CPI illustrates this phenomenon. If you look at 2020, prices dropped last April and May, and thus today’s prices are being compared to a lower starting point than if the January through March trend had continued. In fact, compared with May 2019, prices are up just 2.5% (WSJ)

The base effect only partially explains the May increase. Prices did in fact jump a good bit. As with earlier posts, it remains to be seen if this is transitory pressure on prices, or if it will continue.

When you look at which sectors saw the biggest increases, it might help you evaluate whether or not the inflation is transitory. Check out used cars and airfares! (Rental cars also increased tremendously as a result of the actions taken last year by the rental car agencies to preserve cash and stay afloat.)

Another area receiving attention is what happened to consumer debt recently. Yahoo Finance, CNBC, and GoBankingRates.com published articles quoting data from a consumer debt study by Experian. Here are a few of the highlighted data points:

• Total consumer debt increased $800B from 2019 to $14.8 trillion. (CNBC quotes 14.64 trillion)

A closer look at the types of debt shows that mortgages, car loans, student loans, and personal loans increased in total, but credit card and home equity debt decreased.  This detail tells a more complete story of pandemic financial impacts.

• Average total debt per person reached a level not seen since 2010.

But this statistic increased only slightly from 2019, to just under $93,000. Again, looking at a graph or reading past the headline tells a more nuanced story. (Average debt may be the highest since 2010, but the past year was not the largest annual increase.)

Breaking average debt down by generation (below) shows that the younger the cohort, the greater the increase in the average debt. This seems to support the headline, but if you only looked at the generational data, you would think average debt went up more than a few hundred dollars per person. It does not appear to be consistent with the overall average.

I will demonstrate one more weakness with referencing “average” data. Taking data from this same study and focusing on Generation Z, for example, we see the following averages by category:

How does one make sense of this data? The average balances by category are obviously not additive to get the overall average, so what do the category averages represent? I tried to generate these averages from the total debt and total number of accounts data given in each category report, but did not come close to these averages (except for mortgages).  

Even if I could replicate these averages, are they meaningful? For example, how many 18-23 year olds have mortgages or HELOCs? For these categories (and perhaps all of them), a median or even a mode would give a better picture of what the “average” Gen Z was dealing with. This is a perfect example of how averages can be heavily influenced by outliers.

There is no lesson plan suggested here. This is simply an example of how you can pull a headline and have your students look beneath the surface to see if the actual data tell the same story as the headline.  

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.

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