GDP Growth | The Rational Walk

Advance GDP Estimate for Q4 Warrants Skepticism

While reviewing the Bureau of Economic Analysis (BEA) “advance estimate” of Q4 2009 GDP, it seems instructive to revisit the Q3 2009 “advance estimate” which was discussed here exactly three months ago. A quick review suggests that there is little point in treating preliminary reports too seriously due to significant inaccuracies which often result in subsequent revisions. While investors and politicians always fixate on the advance number, few outside the economics profession seem to pay much attention to subsequent revisions. Read this article for a brief discussion on Q4 GDP estimates.

Looking Behind Headline GDP Statistics

Shortly after 8:30 am this morning, cable news networks and web sites quickly reported the government’s initial estimate of 3.5% growth in Gross Domestic Product (GDP) for the third quarter of 2009. In terms of depth of reporting, most of these news stories on macroeconomic developments are similar to stories regarding company earnings. If your only source of information are the “headline numbers”, you will be left with a stream of data that is a mile wide and an inch deep. Read this article for more details on Q3 2009 GDP numbers.