The monumental task of measuring the GDP over and over again
The monumental task of measuring the GDP over and over again
The Bureau of Economic Analysis released its third estimate of second-quarter GDP — a revised look at how much the economy grew between the beginning of April and the end of June. Today’s update did not change the BEA’s overall estimate for 2.1% annualized.
But why does GDP get revised so much?
“We take a number of different stabs at measuring GDP,” said David Wasshausen, Associate Director for National Economic Accounts at the BEA. “As more complete and new information becomes available, the estimates get refined.”
The BEA’s first sketch of GDP is called the “advance” estimate and is released approximately one month after the end of a quarter. The BEA produces second and third estimates in the following months as more data becomes available. There is also an annual update every summer.
“Today’s update was extra special [because] we released the results of the 16th comprehensive update of the National Economic Accounts,” said Wasshausen. The BEA typically releases a comprehensive update about once every five years capturing new information that’s become available and changes in methodology.
Some of the changes in the comprehensive update today updated methodology on measuring interest paid by Federal Reserve Banks, real estate investment trusts and National Flood Insurance Program services. Some of the changes could bring Gross Domestic Product more in line with another measure of the national economy, Gross Domestic Income.
“I think it’s important for everybody, just to take a minute to think about this huge task that these government agencies have and trying to provide this data,” said Charles Gascon, a senior economist with the research department at the Federal Reserve Bank of St. Louis. “I mean, I have a hard time keeping track of like my own household budget, so to think about just the scale and scope of this project of thinking, ‘We’re going to measure all of the goods and services that are produced consumed in the U.S. economy, not just in a year, but within a quarter, and then we’re going to do it over and over and over again?’”
“The BEA has a monumental task,” said Nicole Cervi, an economic analyst with Wells Fargo. “In order to give policymakers and just broader economic viewers a glance of what the economy looks like as close to real-time as the BEA can, that’s why they do advance second and third [estimates].”
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