How to Fake Economic Growth
by JACK RASMUS
AUGUST 01, 2013
My recent article, ‘Economic Recovery by Statistical Manipulation’, written July 29, 2013, forewarned that revisions to US GDP data due on July 31 for the April-June quarter would likely show a larger GDP and growth for the US for the quarter, as well as for earlier years. GDP data published today, July 31, 2013 by the US government’s Bureau of Economic Analysis (BEA) have confirmed that prediction.
A poll of dozens of economists by the Reuters international news agency prior to the 2nd quarter GDP data release showed professional economists were collectively forecasting no more than 1% GDP growth for the 2nd quarter. As noted in our previous article, some were forecasting GDP as low as 0.5% for the quarter. The BEA’s GDP first estimate for the 2nd quarter indicates a 1.7% GDP growth. What happened to explain such a great divergence from forecasts and the BEA data?
As Reuters notes, in a follow up to the BEA release, “comprehensive revisions to the data cast the economy in a better light than previously.” Not only has the most recent quarter of GDP been boosted, from 1.1% in the first quarter of 2013 to 1.7% now in the second (compared to forecasts of 1%), but GDP for all of calendar 2012 has been revised upward as well, from the prior official 2.1% to 2.8%. That’s a 33% upward revision.
Today’s GDP revisions—which will continue henceforth to boost future GDP numbers—focus largely on boosting the contribution of business investment to GDP. The revisions have resulted in significant increases in the estimates for business investment and will continue to do so in the future. It is not necessary to bother readers with the arcane details; suffice to say that the boosts to investment totals Obamas_Economyhave to do with changes in how depreciation is calculated, pension accounting, and other items. The changes in depreciation in particular have resulted in GDP upward revision.