Wsj_gdp_10272005204404What will today’s GDP data look like? (and yet another call to take "the under?")

The consensus is for 3.6% growth, according to Economists surveyed by Dow Jones Newswires and CNBC. That would be quite robust, despite the inflation working  its way through the economy. 

Its tough enough to come up with accurate estimates under the best of circumstances; given all the incomplete data and forced assumptions, this GDP number may be even trickier. The WSJ’s Justin Lahart notes that "the Commerce Department lacks September business inventories and trade figures, it will be making assumptions of its own. And inventories and trade both got roiled in September." (I called it the Fog of Katrina)

Economist and CNBC host Lawrence Kudlow, a perennial optimist if ever there was one, thinks the energy spike post-Katrina may clock GDP: He’s looking for a real downside surprise.

I think his logic on this one is compelling. Barring any special BLS adjustments, 3.6% looks mighty aggressive. 2-3% might be a more accurate read, with Larry on the low end of the scale.

I’ll wildly guess 2.75% — but its only a guess — I don’t model GDP . . .

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UPDATE: October 28, 2005 9:46am
Surprise!  GDP came in at 3.8% — I havent torn apart GDP data yet, but at first read it looks like  the increase was driven by consumer spending (Automobiles in particular), inventory changes, and a big increase in Federal government spending.

Dow Jones noted "For its first and second estimates of a particular quarter’s GDP, Commerce must make assumptions for some components of economic activity, for which data are unavailable."

So how did we end up with such a strong number, despite the big inflation spike and apparent weakening? Here’s the money quote:

"The Commerce Department said it adjusted its methods in some cases to take the hurricane into account."

Let’s see if we can’t figure out what these adjustments were . . .

 

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Source:
AHEAD OF THE TAPE: One to Grow On
JUSTIN LAHART   
October 28, 2005; Page C1
http://online.wsj.com/article/SB113045154267081762.html

Category: Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “GDP Shocker?”

  1. Simon says:

    I agree with your emphasis on a policy failure over an Intel failure. But I think you are glossing over one major point. The Administration misled the American people, including me. We trusted (and the Congress as well) the representations made by the President, the Vice President and other members of the Administration about mushroom clouds, uranium tubes and the Niger uranium purchase and supported the President’s decision. No rational analytical reasonable person in the Administration’s shoes would have accepted the shaky intelligence as a basis for war. The British effectively said so in the Downing Street Memo. Wilson’s report was 1 of 3 stating that the Niger uranium sale claims were false. The CIA refused to let the President put the claim in a speech in October 2002 and only permitted its includion in the SOTU address based on verbal pyrotechnics. We were purposely mislead in a manner not seen since the Gulf of Tonkin. In my book, with tens of thousands dead and maimed, and our treasury depleated, crimes were committed.

  2. Idaho_Spud says:

    3.8 percent! I can barely believe it!

    Hey wait a minute! Isn’t GDP growth a downward factor when calculating CPI? Something smells funny here…

  3. Thijs says:

    “The Commerce Department said it adjusted its methods in some cases to take the hurricane into account.”

    Isn’t this just plainly misleading? I think it would be better to give the real number (without adjustments) and then also give a number after adjustments. And how much do you want to adjust? It’s like… jee, let’s go for somewhere around 3.8%… ok, we reached it… done. Wonder if next quarter’s gdp are adjusted for something else.

    Perhaps we can adjust for anything we don’t like and produce good numbers forever…

  4. Thijs says:

    “The Commerce Department said it adjusted its methods in some cases to take the hurricane into account.”

    Isn’t this just plainly misleading? I think it would be better to give the real number (without adjustments) and then also give a number after adjustments. And how much do you want to adjust? It’s like… jee, let’s go for somewhere around 3.8%… ok, we reached it… done. Wonder if next quarter’s gdp are adjusted for something else.

    Perhaps we can adjust for anything we don’t like and produce good numbers forever…

  5. spencer says:

    Perhaps the more interesting report was the Employment Cost Index that shows private wages & salaries as well as fringe benefits are slowing, not accelerating.

  6. spencer says:

    If you look within the data your find that in the third quarter real PCE — roughly two thirds of final demand –
    averaged $7904.7 B.

    From the monthly real PCE data it was
    7954.4 in July
    7876.0 in August

    this imples it was 7883.7 in Sept.

    this pattern was driven by auto sales.

    It shows we entered the quarter with strong growth in real GDP because of auto rebates but we are ending the quarter with real PCE below the average of the quarter so we are starting off with a very weak base for the 4th Q.

  7. yourblogisgreat says:

    There are laws of physics that govern the physical world, and there are basic fundamental forces that govern the financial world. If 66% of the economy is consumer spending, and the consumer savings rate has gone negative, it should be a relatively simple matter to figure out the rest. You don’t need government statistics to prove your case, nor do you need the dismal science. Market forces will hit the reset button when they sense too much bullshit. This cycle has been going on since the beginning of time. The thing that amazes me is that people perpetually think the rules change, and that they are in a new era.

  8. Victor says:

    I enjoyed your commentary on the GDP, fwiw I just watch the charts to tell me which direction the price will go. FWIW you can see my intra-day market analysis of the Emini S&P 500 at http://dynamicfutures.blogspot.com/. I would be curious to hear your feedback.

    Best regards,

    Victor

  9. Barndog says:

    …”a big increase in Federal government spending”.

    I’ll take the rocket scientist leap, and speculate that this was due to the emergency spending for hurricane relief in the Gulf Region?

    Whatever happened to common sense? My take is, these morons will manipulate the statistics to their advantage every opportunity they get.

    Why?

    The opportunity to make more profit. Like Barry said the other day, most folks with 3000 SF homes are so overleveraged to be where they are, this winter is going make their heads explode when the heating bills start coming in.

    If the mass of our GDP is resting upon the laurels of the auto industry – like it used to here in Lansing, Michigan… we are in serious trouble, folks. Just ask Oldsmobile…. oh – that doesn’t exist anymore.

    I’ll leave you to figure the rest out on your own.

    Semper Fidelis

  10. Econbrowser says:

    New GDP data and recession probabilities

    The Bureau of Economic Analysis yesterday released its advance estimates for the third quarter, reporting real GDP grew at an annual rate of 3.8%.