The advance estimate for second quarter GDP came in lower than expected. At just 1.211%, the anticipated rebound from the dreadful winter failed to materialize in any significant way. Worse, benchmark revisions now suggest that GDP has been around 1% for three straight quarters; Q4 2015 was revised down from 1.377% to just 0.869%; Q1 2016 was revised back 0.831%.
Most of the benchmark revisions instead focused on seasonality, a particularly troubling result since it can only reduce faith in the statistical processes while at the same time further confirming what we have charged all along – that this economy is very different and thus statistics that were designed for ‘normal’ circumstances are largely inappropriate. Recognizing that they have a very real problem with all this, the BEA now proposes starting 2018 to also publish the unadjusted GDP figures.
The most visible example of revisions rewriting short-term economic history was the first half of 2015. Under the 2014 benchmarks, Q1 GDP was first estimated to have been 0.2% in the advance release, revised to -0.7% at the second estimate, and then -0.2% for the ‘final’ number. The benchmark revisions in July 2015 added the controversial ‘residual seasonality’ further seasonal adjustment, which brought the GDP rate to 0.6%. In accordance with the new July 2016 benchmarks released today, Q1 2015 GDP is now thought to be 2.0%. That is a significant difference.
This post was published at David Stockmans Contra Corner on July 29, 2016.
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