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One of my pet peeves is the initial report on GDP. Every three months, the government reports on how well the economy did in the just-ended quarter. The first report comes out at the end of the first month of each quarter (January, April, July and October). It’s then updated twice more, at the end of each succeeding month. Tomorrow, the second-quarter report will be revised.

My complaint is that the later revisions came often be quite large. My feeling is that if that’s the case, just wait until you have a better number. There’s no use feeding us information which can deviate so much. Take your time and get it right.

At the end of July, the government said that the economy grew, in real terms, by 2.5% for the second three months of the year. I thought this was way too low. Before the report came out, I wrote that I would be surprised if GDP came in at less than 3.4%. I still feel that way.

When looking at the markets, it’s important not to be too attached to your current outlook. Keynes said, “When the facts change, I change my mind—what do you do, sir?”
That’s always good to remember. But I have a suspicion that the facts haven’t changed. Perhaps all this “soft landing” talk is a bit early.

Bear in mind that it’s not unusual for the GDP to be adjusted by large amounts. For the first quarter, the government initially said that the economy grew by 4.8%. This was later revised to 5.6%. That’s a big change. What we tolerate in economic stats, we would never sit still for in baseball scores. And even after everything is said and done, the GDP numbers can still be altered. With the last report, the government also adjusted every GDP stat going back to 2003.

I’ll have more tomorrow morning when the latest revision comes out.

Posted by edelfenbein at August 29, 2006 9:16 AM