Unexpectedly Intriguing!
August 1, 2017

Compared to last year, the U.S. Bureau of Economic Analysis' revisions of GDP data in 2017 was almost trivial!

The chart below shows how the nation's real, inflation-adjusted Gross Domestic Product in terms of constant 2009 U.S. dollars changed from the figures that were reported on 29 June 2017 to the revised figures released on 28 July 2017.

Previously Reported and Revised Real GDP, 2010-Q1 Through 2017-Q1 (28 July 2017)

The 2017 GDP revision was concentrated on the period from 2014-Q1 to the present, with real GDP estimates being revised upward for each quarter from 2014-Q1 through 2017-Q1. The quarter that saw the biggest adjustment in terms of constant 2009 U.S. dollars was 2015-Q2, whose value was increased by over 0.5% from its previously reported figure of $16.374 trillion ($16,374 billion as shown in the chart above) to $16.461 trillion ($16,461 billion).

The problem with presenting "real" data like this is that none of us live in a world without inflation. Worse, the year of 2009 that the BEA currently uses as the default year for setting the "real" value of a U.S. dollar marked the bottom of a recession nine years ago, where the prices of many goods and services from that era have very little connection to today's prices for the same items.

For example, does anybody remember Subway's highly successful Five-Dollar Footlong promotion?

Aspects of that promotion lasted until February 2016, when Subway officially killed it because it could no longer afford to continue selling sandwiches at that price any more. Every footlong sandwich sold by Subway that you could have bought for just $5.00 back in 2009 costs more than that today.

And then there's the question of which inflation should you adjust the data to account for? For Subway sandwiches for example, should we account for inflation to be in terms of the price of a footlong turkey breast sandwich? Or a Black Forest Ham sub? Or perhaps a Meatball Marinara?

Inflation measures come with different ingredients too. Should we use the GDP deflator? The Consumer Price Index for All Urban Consumers? Or Personal Consumption Expenditures? Or how about our favorite, the Tomato Soup standard?

In the end, it all comes back to nominal data, which are always reported in the value of the "current" dollars for the period where they were recorded. The chart below shows the BEA's revisions to its reported nominal GDP data:

Previously Reported and Revised Real GDP, 2010-Q1 Through 2017-Q1 (28 July 2017)

It basically tells the same story as the real data, but the size of the changes look smaller because the numbers now look as big as they appeared in real time.

On a side note, the BEA's combined GDP for the 50 states and the District of Columbia was revised back in June 2017, with very little change compared to the large revisions that were reported a year ago. We'll visit that data in an upcoming post where we'll consider the amount of the nation's GDP that was largely generated outside of the territory of the United States.

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