Economy Finally Reaches “Escape Velocity,” Heads South
It’s hard to measure the growth rate of a vast, complex economy with just one number, accurately, and on a timely basis.
The Chinese found an ingenious solution. They decree the growth rate and announce it in advance, and that’s about what the number says when it comes out. It’s faster than any other major country can produce its GDP numbers. It avoids nasty surprises and doesn’t need messy revisions. Whether or not establishing statistical data by decree is an accurate reflection of reality is a hotly disputed topic.
But then, the accuracy of any statistical data is a hotly disputed topic.
In the US, it’s a slog to get to the final answer. Quarterly changes in GDP, as measured by the Bureau of Economic Analysis, come in a series of estimates. The first estimate gets all the press, but subsequent revisions in the second and third estimates can be significant. Further revisions follow over the years. By the time the BEA has a fairly good handle on what actually happened back in the day, no one cares anymore.
So the Atlanta Fed started a new approach in 2011. The forecasting model is supposed to reflect a more immediate picture of the economy. Taking into account economic data when it is released, the model adjusts its GDP forecast accordingly and closer to real time. It has plenty of quirks. It’s jumpy as it reacts to incoming monthly data that is itself highly volatile and subject to revision. But it’s a good indication of where the economy has been going over the past few months.
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