GDP correction: Oops!

May 29, 2014

The revised GDP number for the first quarter showed a decline of 1% over the previous quarter. Nevertheless, stocks rose. What’s going on? 

  • Correction. The advance estimate released a month ago showed an increase in GDP of 0.1%, which we’re now changing to -1.0%. Oops! The BEA notes that the new estimate “is based on more complete source data than were available last month.” We know from experience that corrections of this magnitude aren’t unusual, which is one reason we tend to downplay GDP numbers.
  • Old news. The other reason to downplay this number is that it’s old news. Remember: the first quarter ended two months ago. Lots of other evidence has accumulated since then that suggests growth has picked up, including relatively robust employment and retail sales reports.

In short, no need to panic, things look fine for now, despite what GDP suggests.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: