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Thursday, May 08, 2008

Feldstein: Misleading Statistics

by Calculated Risk on 5/08/2008 01:30:00 AM

Martin Feldstein writes in the Financial Times: Misleading growth statistics give false comfort

Prepositions matter. The recent government report that US gross domestic product increased 0.6 per cent in the first quarter was very misleading. It implied that economic activity was rising in January, February and March. But the increase actually refers to the rise from the average level in the fourth quarter of 2007 to the average level in the first quarter. Monthly data since January indicate that economic activity and GDP have been declining since the start of this year.
Although the government does not provide monthly estimates of GDP, Macroeconomic Advisers, a private forecaster, constructs them ... Although GDP declined during the first quarter, the average of the monthly figures in the first quarter ($11,711bn) is higher than the average of the monthly figures for the final quarter of 2007 ($11,675bn).
This is the same point I made when using the Two Month Method to estimate PCE for each quarter. Feldstein is correct on the math and the economy is probably in a recession.