Deflator Inflator !
Final word on this subject (for now).
As previously noted, we are no longer calling the GDP Deflator by that misleading name; untill such time as the BLS models more accurately reflect reality, it shall be known as the GD Inflator.
Here is a visual depiction showing precisely how the Inflator impacts GDP:
The last chart is the one that really sums this all up -- it shows the total contributions to GDP inflator from Imports.
This chart shows that but for the big price increases of imports (primarily Energy), GDP would have been negative:
charts via Jake at EconomPic Data
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Deflator Inflator !:
The charts are beautiful. As it happens Jake and I have been "discussing" them for two days. It turns out that he built them using the deflator directly. In other words you can't just knock down the %change in GDP by adjusting using the % change in the deflator. The first is the sum of several seperately built economic numbers the latter is prices. Or so at least it appears to me - but then I'm easily confused and don't understand this clearly. However this whole thing boils down to wanting to know what real GDP is net of the impact of imports, i.e. trade. As a simple experiment why doesn't somebody just take the GDP tables already under dissection and net out the import and export numbers.
Oops, did that. The real economy net of imports and exports grew at 1.1% in Q1 and and 0.5% in Q2, YoY. Try it yourself but it I don't think it's anywhere near what looks like -1% just eyeballing the charts.
Posted by: dblwyo | Sep 1, 2008 8:29:50 AM
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