2Q GDP Unchanged (someone please explain how)

Thursday, September 29, 2005 | 09:34 AM

I already made it clear that I have strong reservations about the revised 1st Quarter GDP (as well as other data).

Today, we see 2Q GDP revisions came in unchanged from the original 3.3%.

Question: We know what aspects get measured, and what they were upon the initial and revised release. Let's compare :

· U.S. exports rose by 10.7%, instead of the earlier reported 13.2% increase.  (Source: Department of Commerce.

· 2Q Corporate profits (after taxes) rose 5.3% to $975 billion -- a smaller gain than the previously reported 6.9% rise. (DoC).

· Businesses inventories fell by $1.7 billion -- far less than the originally expected inventories raise of by $2.6 billion. (DoC).

· "Personal consumption was somewhat stronger due to higher spending on utilities, like electricity." (WSJ)

All these factors imply that GDP slowed significantly more than originally expected. Yet its unchanged, according to the Department of Commerce.

So by what accounting sleight of hand can inflation go up more than expected, while profits, exports, and business inventories go up less than expected?

Inflation. Remember, GDP tries to measure actual output, not price increases. The secret must be buried somewhere in the inflation data. If prices edged higher in the quarter than originally believed -- while data from exports, inventories and profits came in below prior expectations -- how can GDP remain unchanged? 

I suspect its in one of the PCE price gauges -- I'm tracking someone down in the Commerce Department to see if that also excludes food and energy in this measure.

If so, that would explain the steady GDP data in the face of all these other negative factors . . .

<spacer>

UPDATE I: September 29, 2005 10:29 am
Commerce tells me that GDP is not calculated ex-food and energy. Further, each individual component has its own price deflator.

Again, the emphasis is on measuring output, not price.

This requires more digging . . .

UPDATE II: September 30, 2005 6:29 am

I contacted John Williams of Shadow Government Statistics, He notes that "The small increase in the deflator was matched almost by a small upward revision to the nominal numbers.  The lack of real growth change was a function of rounding and an artifact of the way the real numbers are put together.  Real GDP components haven't totaled to the aggregate numbers in years, hence the "residual" factor.  Try dividing the nominal GDP by the published deflator and you don't come within $5 billion of the real number."

Interesting stuff.


<spacer>

Source:
GDP Growth in 2nd Quarter Is Unrevised at 3.3%
By JEFF BATER and ELIZABETH PRICE
DOW JONES NEWSWIRES, September 29, 2005 8:42 a.m.
http://online.wsj.com/article/0,,SB112799612439255633,00.html

News Release: Gross Domestic Product and Corporate Profit  http://www.bea.gov/bea/newsrelarchive/2005/gdp205f.htm

“Final” Estimates of GDP
THURSDAY, September 29, 2005
GDP GREW 3.3 PERCENT IN SECOND QUARTER; PROFITS ROSE
http://www.bea.gov/bea/newsrelarchive/2005/gdp205f_fax.pdf

Thursday, September 29, 2005 | 09:34 AM | Permalink | Comments (11) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c52a953ef00d8345966ed53ef

Listed below are links to weblogs that reference 2Q GDP Unchanged (someone please explain how):

Comments

There is a PCE price index ex food and energy, which I've read the Fed follows with interest, but real PCE is deflated by a 'total' PCE price index. It's perhaps worth noting that for the cooling season (since June 1 or thereabouts), portions of the upper Midwest have had roughly twice the cooling degree days as last year. That may explain both the specific citation of electric utility expenditures in the WSJ and, as it affects late Q2 (as well as Q3), the relatively late-arriving information. I suppose the start of GM's fire sale could have affected the tail end of Q2 PCE as well, though I have no idea how long it would take to get that info in the GDP estimate.

Posted by: Tom Bozzo | Sep 29, 2005 10:24:05 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner