More Fuzzy Numbers - GDP Wildly Overstated

Friday, January 22, 2010, 1:25 AM
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If you've watched Chapter 16 of the Crash Course (Fuzzy Numbers), you know that I am especially dismissive of the way in which the BEA calculates the US GDP figures.

All manner of statistical tricks, many of which would land private business accountants in jail, are used to create an overly optimistic view of the GDP.

Recently the US GDP was reported as being +2.2% for the 3Q09, and many are calling for 4Q09 to come in at around +3%.

This means that when we add these to the -6.4% 1Q09 and -0.7% 2Q09 results and average everything together, the full year will have been down less than half a percent.

Imagine that….with auto and home sales off by more than 10%, with port shipments down by some 20%, with gasoline and electricity use back to levels last seen in a prior decade, with unemployment over 10% (and the underemployed number at 17%), and with the largest-ever collapse in household borrowing on record….the BEA manages to come out with a full-year GDP report that will show an exceptionally modest decline of roughly one-half of one percent.


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