Economy Looking Weak, Data Revisions Don’t Help

The economy is certainly weak. The latest report on GDP showed sub-par growth in the second quarter. Revisions to past data, which occur every summer, showed that the first quarter was even worse than we previously thought.  Here’s a comparison of GDP growth rates, with “old” indicating the official data as released prior to today, and “revised” indicating the new view. I’ve highlighted the significant differences.

Looking at past history, the recession was worse than we previously thought–not a surprise, really, when you think about the sharp decline in employment at the time.

The bigger surprise is the downward revision of first quarter 2011, as well as fourth quarter 2010. The latest monthly numbers show us slumping, and this data release confirms it.

Where are we going from here? I continue to think that the time lags on monetary policy are long, and thus the benefits of the Federal Reserve’s quantitative easing will be felt in the second half of the year.

Note on the statistics: the government revises official statistics periodically because … it really does not know everything. Early announcements are based on surveys of a sample of companies and people, plus educated guess-work. Over time, more tax returns are files, informational returns are filed. Periodically, a business census is done, such as the Census of Manufactures which is conducted every five years. The statisticians take the fuller data, but still have some magic to do. Those periodic censuses are used to nail down certain points (like every fifth year’s level of output), with lesser quality data used to estimate the quarterly fluctuations between the fifth-year data points. In addition, more data give us better seasonsal adjustment, which itself consitutes a revision. This data stuff is not political; it’s simply good statistics.

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About Bill Conerly 34 Articles

Affiliation: Cascade Policy Institute

Dr. Bill Conerly is the consultant who connects the dots between the economy and business decisions. He holds a Ph.D. in economics from Duke University and was formerly Senior Vice President at First Interstate Bank.

Dr. Conerly is author of Businomics: From the Headlines to Your Bottomline—How to Profit in Any Economic Cycle (, which provides business leaders with a framework for understanding current economic news. He is co-author of Thinking Economics, a multi-media high school economics curriculum used in 24 states.

Dr. Conerly has been interviewed on the News Hour with Jim Lehrer, CNN and local television and radio stations across the country. He has been quoted in ...More the Wall Street Journal, Fortune Magazine, and USA Today.

Dr. Conerly is chairman of the board of Cascade Policy Institute, a member of Oregon Governor Ted Kulongoski’s Council of Economic Advisors, and a Senior Fellow at the National Center for Policy Analysis.

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