Bad News in the Revised GDP Numbers
Posted at 8:45 a.m. on Nov. 30, 2012
While the latest GDP numbers showed a strong upwards revision, Bill McBride digs deeper into the report and unearths some worrying signs.
“There were three main sources for the revision: 1) Personal consumption expenditures (PCE) increased at a 1.4% annualized rate, revised down from 2.0%. This means PCE contributed 0.99 percentage points to real growth in Q3 (revised down from a 1.42 percentage point contribution in the advance release), and 2) the change in private inventories added 0.77 percentage point contribution to growth (revised up from -0.12), and 3) exports were revised up to a 0.16 percentage point contribution (revised up from -0.23). This suggests weaker final demand in the US than originally estimated.”
Justin Wolfers: “Buried deep in the report is an alternative measure, known as gross domestic income, obtained by adding up all the income earned… The latest GDI data tell a sobering story. In the three months through September, GDI grew at an annualized, inflation-adjusted rate of only 1.7 percent, compared with 2.7 percent for GDP. Historically, when we’ve seen divergences like this, it has been more common for the GDP estimate to be revised toward the GDI estimate.”