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Rapid Estimates of U.S. GDP:. Timeliness, Estimating Methods & Accuracy. Dave Wasshausen. International Seminar on Timeliness, Methodology and Comparability of Rapid Estimates of Economic Trends Ottawa, Canada May 27-29, 2009. Timeliness.

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Rapid Estimates of U.S. GDP:

Timeliness, Estimating Methods & Accuracy

Dave Wasshausen

International Seminar on Timeliness, Methodology and Comparability of Rapid Estimates of Economic Trends

Ottawa, Canada

May 27-29, 2009

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  • “Advance” estimates of GDP released toward the end of the first month after the end of the quarter.

    • Based on partial source data and BEA assumptions

    • Complete set of expenditures estimates; partial set income estimates

    • Corporate profits and net interest are not prepared due to insufficient source data

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  • Tradeoff between quality and timeliness

    • Try to strike the appropriate balance between accuracy and timeliness

    • BEA releases several “vintages” of GDP estimates, each subsequent vintage based on better source data

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Source Data for Advance Estimate

  • Three months of source data are available for:

    • Consumer spending on goods

    • Shipments of capital goods excluding aircraft

    • Motor vehicle sales and inventories

    • Manufacturing durables inventories

    • Federal government outlays

    • Consumer, producer and international prices

  • Only two months of data are available for most other key source data (including construction spending, foreign trade, & remaining inventory series)

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Estimating Methods

  • Retail Control Method

  • Commodity Flow Method

  • Price-Times-Quantity Method

  • Judgmental Trend

  • Imputations

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Revisions and Accuracy

  • Revisions and accuracy are related, but not the same

    • Some of the most inaccurate data have never been revised

    • Some of the most accurate data are subject to regular revisions

  • Revisions must be judged against average growth and volatility in growth

  • Publish regular revision studies (Feb. 2008)

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    • Single largest source of revisions is updating of seasonal factors

    • Largest source of revisions in trend growth is changes in concepts, methods, and source data intended to update the accounts and improve accuracy.

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    • Current quarterly estimates of real GDP correctly indicate:

      • Direction of change 98 percent of the time

      • Whether accelerating or decelerating 74 percent of the time

      • Whether growth is above, near, or below trend growth more than three-fifths of the time.

    • Estimates have also been shown to be un-biased, with no identifiable bias from the introduction of real time data

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    Revisions to Real GDP estimates

    Real GDP Growth Rate: Quarters, 2008

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    Revisions to GDP for QII, QIV

    • Large changes in energy prices (upward in QII, downward in QIV).

      • Wedge between GDP and Gross domestic purchases prices.

      • Inventory valuation adjustment.

    • Difficulty of projecting data for the missing month.

    • Importance of publishing “key assumptions.”

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    • BEA’s goal: Early estimates that provide users with a useful “snapshot” of the economy (in the aggregate and by component)

    • BEA’s early estimates do a relatively good job providing an overall picture of economic activity. In general, they tell us:

      • If the economy is expanding or contracting

      • If growth is accelerating or decelerating

      • If growth is high or low relative to trend

      • What major components are contributing to growth

      • The timing of business cycle peaks and troughs