A few years ago, I gave a short explanation of how government economists are fudging their statistics. I explained that GDP numbers are just estimates, and they don’t really matter anyway:
… government economists make estimates of GDP. Then, they revise those estimates and release this number a month later. Then they conjure up ‘final GDP’ and release that number a month after their revised estimates are reported. And even later, they revise the ‘final GDP’ numbers. It never ends; reportedly, government economists are still revising GDP from World War II.
Government estimates of GDP no longer matter. The BEA changed how GDP was calculated last July:
A pharmaceutical company develops a new cancer drug. A Hollywood studio creates a box-office blockbuster. A song writer records a new hit. On July 31, BEA will begin including the amount of money businesses invest in the production of such intellectual property as part of gross domestic product (GDP).
Here’s my question to the BEA: how do these items add to the production of goods in the economy?
Here’s my answer: they don’t. For example, take the latest hit song by
Hannah Montana Miley Cyrus. How do sales of Wrecking Ball on iTunes increase my well-being? What if that crap actually makes me worse off because…well, have you heard that song or seen the video? Assuming that most people over the age of 25 are like me, wouldn’t that make GDP decrease instead of increase?
Oh, well. This change can’t make much of a difference, can it?
Yes it can. It was estimated (there’s that word again) that adding intellectual property would increase GDP by 3%…
They have already adjusted the GDP numbers to wash away the Great Recession of 2008-2009. The negative GDP numbers for four consecutive quarters are now just one negative number and three positive numbers (I have the Excel downloads to prove this). Thus, I wasn’t surprised to come across this article on ZeroHedge.com today:
And, as predicted, all these prediction came true because on April 29, 2015, when the BEAR released its first estimate of Q1 GDP, it said the US economy grew only 0.2%?
The number was so bad, it prompted the BEA to unleash the infamous “double seasonal adjustment” to eliminate residual seasonality – i.e., stuff that should already have been ignored due to the original seasonal adjustments.
Looking back, however, we can now revise the statement, because all those doom and gloom predictions came true “at the time” as today, as part of its Q2 GDP release, the BEA also released its annual revision of National Income and Product Accounts.
What it shows is comic: while we already noted the broad based revision to the data, which resulted in a downward revision to GDP prints from Q3 2016 through Q1 of 2017, it was the “snowfall” quarter of 2015 that drew our attention. In the best example of revisionist economic history we have encountered in years, the BEA has completely forgotten all those worries about cold weather, which readers may recall prompted the Fed to push back on its fledgling tightening intentions in the start of 2015 worried about economic strength. And as a result, following a slew of revisions, what was originally a weather-crushed 0.2% GDP quarter is as of this moment, a nice and balmy 3.2%.
And that’s why all economic data is absolutely meaningless.
Economic data isn’t absolutely meaningless. But the statistics coming from government economists and agencies surely is. Anytime you can “adjust” the results to say what you want them to say, you aren’t really a “scientist” as so many PhD economists like to claim. And when you have to re-adjust your adjustments to get the answer you want, well, there’s really no difference between you and David Blaine.