Wednesday, July 25, 2018

Technical Note: GDP Release and Revisions

by Bill McBride on 7/25/2018 02:38:00 PM

With the GDP release on Friday, the BEA will release the 2018 Comprehensive Update. This will include changes in how GDP is calculated, revisions to previous years, and the third phase of removing residual seasonality.

A few key points:
1. The entire series of GDP (annually all the way back to 1929, and quarterly back to 1947) will be updated with new seasonal adjustments.
2. Forecasts of Q2 GDP could be off significantly.
3. The BEA will now release GDP Not Seasonally Adjusted (every year GDP NSA declines in Q1).

From the BEA: Preview of the 2018 Comprehensive Update of the National Income and Product Accounts

In July, the Bureau of Economic Analysis (BEA) will release the initial results of the 15th comprehensive, or benchmark, update of the national income and product accounts (NIPAs). Comprehensive updates are usually conducted at 5-year intervals that correspond with the integration of updated statistics from BEA’s quinquennial benchmark input-output accounts; the last comprehensive update was released in July 2013.

Comprehensive updates and, to a lesser extent, annual updates, provide the opportunity to introduce major improvements to maintain and to improve the NIPAs as outlined in BEA’s strategic plan. The changes are generally of three major types: (1) statistical changes to introduce new and improved methodologies and to incorporate newly available and revised source data, (2) changes in definitions to more accurately portray the evolving U.S. economy and to provide consistent comparisons with data for other national economies, and (3) changes in presentations to reflect the definitional and statistical changes, where necessary, or to provide additional data or perspectives for users.

This article describes the major changes that will be introduced in the NIPAs as part of the upcoming comprehensive update.
And from the BEA: BEA on Track to Implement Third Phase to Combat Potential for Residual Seasonality in GDP
The U.S. Bureau of Economic Analysis is on track to soon implement the third phase of a three-pronged plan to mitigate any potential for residual seasonality in gross domestic product. That’s when seasonal patterns remain in the data even after they are adjusted for seasonal variations.

BEA laid out the plan in 2016, after conducting a painstaking component-by-component review of some 2,000 nominal data series included in GDP to look for possible sources of residual seasonality.
...
Applying seasonal adjustment improvements to the entire GDP times series. (Annual figures stretch back to 1929 and quarterly figures back to 1947).

Publicly releasing estimates for GDP (and gross domestic income) that are not seasonally adjusted, including major components, for the years 2002 and forward.
emphasis added