The advance estimate of US real GDP for the fourth quarter of 2012 came in slightly below the previous quarter. The BEA reports that GDP declined by 0.1% from the third quarter, measured at an annual rate (meaning we multiplied the actual rate by four). Some thoughts:
- Is this a surprise? Econoday, via Bloomberg, reports that the consensus estimate was 1% growth, so yes, it’s a surprise in the wrong direction.
- Do we believe it? Advance estimates are quick reads based on partial information. It’s not uncommon to see revisions over the subsequent two months as more information comes in. There’s no obvious reason to expect a significant upward revision in this case, but right now I’d take a 50-50 bet that the revisions put us above zero.
- Why are we hearing this now, didn’t the fourth quarter end a month ago? Yes, but that’s how the numbers work. The delay is one reason most people focus on more up-to-date indicators, such as employment, retails sales, and so on. More than that, people have good guesses from these indicators of what fourth quarter GDP was, and they’re more optimistic than the reported number. Hence the bet.
- Does that mean we’re ok? GDP growth in the US economy has been 3%, on average, for decades. Whether the current number turns out to be -0.1% or +1.0%, it’s still low. That’s true of the whole period since the recession.
Update (Feb 1): the limerick.