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Reversal in 1Q and 2Q Gross Domestic Product Hints at Flawed Federal Data
Townhall.com ^ | August 3, 2014 | Paul Dykewicz

Posted on 08/03/2014 8:04:51 AM PDT by Kaslin

The merit of the federal government adopting use of Gross Output (GO) as a broadened quarterly measure of U.S. economic activity to supplement the traditional reliance on Gross Domestic Product (GDP) shone when the Bureau of Economic Analysis recently published its first-quarter 2014 findings.

The opportunity to compare the numbers shows that the economy may not have been as weak as the 2.1% shrinkage the GDP indicated in the first quarter when winter storms hit. Indeed, second-quarter real GDP rebounded to grow at a 4% annualized rate, affirming Gross Output’s useful role as a measure of economic activity because it is designed to reflect spending at all stages of production, including business-to-business commerce that is missed in the GDP results.

Gross Output dipped by just 0.1% in real terms (after taking price inflation into account) during the first quarter of 2014. That scant dip effectively left GO unchanged at $30,210.6 billion in the first quarter of 2014.

GDP, which measures the final goods and services purchased by consumers, business and government, in contrast was revised down to -2.1% in real terms, according to the Bureau of Labor Statistics (BEA). The BEA previously estimated that first-quarter real GDP dipped 0.7% to fall to $17,016.0 billion.

The GO data indicates the economy is not scuffling as much as the GDP figures suggested in the first quarter, said Mark Skousen, an economist who also is the editor of the Forecasts & Strategies investment newsletter. Skousen, a Presidential Fellow at Chapman University, has advocated publicly for the government to use Gross Output for more than 20 years as a more comprehensive measure of economic activity than GDP.

Skousen proposed Gross Output as a macroeconomic measure in his book, “The Structure of Production,” published by New York University Press in 1990. Starting this year, the Bureau of Economic Analysis publishes GO on a quarterly basis in its “GDP by Industry” data.

The latest economic information shows that the economy has been strengthening in the second quarter. That rebound suggests to me that the GDP numbers in the first quarter may have been misleadingly negative and at risk of giving lawmakers, policymakers and others a flawed measure of U.S. economic activity.

The Federal Open Market Committee (FOMC) provided further evidence of a growing economy when it announced on July 30 that economic activity had been picking up in the second quarter.

“Labor market conditions improved, with the unemployment rate declining further, the FOMC reported in a statement. However, other indicators suggest that there is a slow recovery in the housing sector and a significant underutilization of labor, even though household spending appears to be rising moderately and business fixed investment is advancing, the FOMC found.

For those reasons, the FOMC concluded “sufficient underlying strength” exists in the broader economy and unemployment is improving enough to once again scale back its asset purchase program. Beginning in August, the FOMC will add to its holdings of agency mortgage-backed securities at a pace of just $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month.

The FOMC is continuing to scale back its easy-money policies, despite the widely varying GDP in the first and second quarters. The risk is that lawmakers, policymakers and others may overreact to the latest economic numbers without vetting them against other data, including the federal government’s recently adopted quarterly gross output statistic.


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS: unexpected

1 posted on 08/03/2014 8:04:51 AM PDT by Kaslin
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To: Kaslin

I don’t believe anything coming out of government. Every agency has been corrupted by leftists.


2 posted on 08/03/2014 8:07:48 AM PDT by JohnnyP
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To: JohnnyP
I don’t believe anything coming out of government. Every agency has been corrupted by leftists.

Right on.

3 posted on 08/03/2014 8:17:18 AM PDT by Digger
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To: Kaslin

“Hints” at corrupt data from Obama’s government?


4 posted on 08/03/2014 8:38:11 AM PDT by Robert A. Cook, PE (I can only donate monthly, but socialists' ABBCNNBCBS continue to lie every day!)
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To: Kaslin

RECOVERY SUMMER 6.0!!

(And if you don’t believe it, you are a racist, a homophobe, or even could be an EVIL CHRISTIAN!)


5 posted on 08/03/2014 9:17:03 AM PDT by tcrlaf (Q)
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To: JohnnyP

I don’t believe anything coming out of government. Every agency has been corrupted by leftists.

And the GOPe, too.


6 posted on 08/03/2014 9:18:27 AM PDT by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: Kaslin

Even assuming the numbers are correct, down 3.5% in the first quarter, up 4% in the second means we are exactly where we were at the end of last year zero growth.


7 posted on 08/03/2014 9:40:57 AM PDT by DManA
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To: expat_panama

Here’s a good Sunday read for you.


8 posted on 08/03/2014 9:47:31 AM PDT by Lurkina.n.Learnin (It's a shame nobama truly doesn't care about any of this. Our country, our future, he doesn't care)
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9 posted on 08/03/2014 9:48:12 AM PDT by trisham (Zen is not easy. It takes effort to attain nothingness. And then what do you have? Bupkis.)
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To: trisham

Figures lie and liars figure.


10 posted on 08/03/2014 11:02:46 AM PDT by bicyclerepair (The zombies here elected alcee hastings. TERM LIMITS ... TERM LIMITS)
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To: Kaslin

There’s no data....They pluck figures out of mid-air.


11 posted on 08/03/2014 11:03:27 AM PDT by dfwgator
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To: Kaslin
when do they start adding pot sales??? that should give it a real kick in the azz...
12 posted on 08/03/2014 11:39:45 AM PDT by Chode (Stand UP and Be Counted, or line up and be numbered - *DTOM* -vvv- NO Pity for the LAZY - 86-44)
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To: JohnnyP

Only a fool would


13 posted on 08/03/2014 11:52:20 AM PDT by Kaslin (He needed the ignorant to reelect him, and he got them. Now we all have to pay the consequenses)
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To: dfwgator

Or out of their orifice, which liberals are famous for


14 posted on 08/03/2014 11:55:20 AM PDT by Kaslin (He needed the ignorant to reelect him, and he got them. Now we all have to pay the consequenses)
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To: Kaslin

So long as “GDP” includes government spending, “GDP” is a worthless metric.


15 posted on 08/03/2014 12:03:42 PM PDT by Rodamala
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To: All

That scant dip effectively left GO unchanged at $30,210.6 billion in the first quarter of 2014.


Uh, GO was thirty TRILLION dollars? In one quarter? Obviously a typo, but if the writer is so careless as not to notice it he is useless as is the article.


16 posted on 08/03/2014 12:17:46 PM PDT by pluvmantelo (Democrats:the party of moral hazard, the IRS, the NSA and the heckler's veto)
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To: Kaslin

Whatever. There’s been a somewhat controlled shrinkage of the real economy (real production) for decades, with one previously productive subgroup after another shunted out of it. Technically inclined people should see where out-of-touch business, political and academic bosses are taking it and focus on preparing themselves to survive the outcome.


17 posted on 08/03/2014 1:59:51 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
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To: Kaslin

It is obvious they moved the bad numbers from Q2 into Q1 so that they could avoid having two negative quarters meeting the common definition of recession.

So yes, they manipulated the numbers for political purposes. Totally corrupt. We’ve become a two bit banana republic...


18 posted on 08/04/2014 1:50:55 AM PDT by DB
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To: JohnnyP

LIEberals LIE!

Ophonybama and his cronies are LIEberals.

LIEberals LIE!


19 posted on 08/04/2014 7:26:31 AM PDT by Taxman (I am mad as Hell and I am not going to take it any more!)
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To: JohnnyP

“I don’t believe anything coming out of government. Every agency has been corrupted by leftists.”

Yep. Only in a corrupt banana-republic can several million more people lose their jobs but the unemployment number drop just before an election.


20 posted on 08/04/2014 7:47:37 AM PDT by CodeToad (Arm Up! They Are!)
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