Question 6.38

6.38 Reporting margins of error.

A U.S. News & World Report article of July 17, 2014, reported Commerce Department estimates of changes in the construction industry:

Construction fell 9.3 percent last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday.

If we turn to the original Commerce Department report (released on July 17, 2014), we read:

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 893,000. This is 9.3 percent (10.3%) below the revised May estimate of 985,000.

  1. The 10.3% figure is the margin of error based on a 90% level of confidence. Given that fact, what is the 90% confidence interval for the percent change in housing starts from May to June?
  2. Explain why a credible media report should state: “The Commerce Department has no evidence that privately-owned housing starts rose or fell in June from the previous month.”