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Accounting for Seasonality in GDP

BEA’s estimates of GDP are seasonally adjusted to remove fluctuations that normally occur at about the same time and the same magnitude each year.  Seasonal adjustment ensures that the remaining movements in GDP, or any other economic series, better reflect true patterns in economic activity.  Examples of factors that may influence seasonal patterns include weather, holidays, and production schedules. (See “Why and how are seasonal adjustments made?“)

Much of the data used by BEA to estimate GDP are seasonally adjusted by the source data agencies. For example, BEA uses seasonally-adjusted inventory and retail sales data from the U.S. Census Bureau and seasonally-adjusted consumer price indexes from the U.S. Bureau of Labor Statistics. BEA does seasonally adjust some data itself, such as Treasury data used to measure federal government spending. There are also instances where BEA cannot apply seasonal adjustment statistical techniques to its source data because the time series is too short to adequately capture seasonal trends.

BEA and its source data agencies regularly review and update their seasonal adjustment procedures to account for changes in seasonal patterns that emerge over time. Despite regular reviews and updates, changes in seasonal patterns can sometimes lead to ‘residual seasonality’—that is, the manifestation of seasonal patterns in data that have already been seasonally adjusted. There are several reasons that residual seasonality might arise:

  • After the detailed, individual components of GDP are seasonally adjusted, BEA aggregates the seasonally adjusted components to obtain total GDP. In some cases, seasonal patterns may emerge in the aggregate estimates that were not apparent in the individual components.
  • In some cases, the source data may be seasonally adjusted at monthly frequency, but in aggregating to quarterly frequency, seasonal patterns may emerge that were not apparent in the monthly data. To maintain consistency with the source data, BEA does not introduce different seasonal adjustments from those used in the monthly source data.
  • In some cases, the current-dollar values and prices may be independently seasonally adjusted, then the values are deflated (divided by the price) to obtain estimates of real expenditures. Seasonal patterns sometimes emerge in the deflated estimates that were not apparent in the current-dollar values and prices.

BEA is currently examining GDP components for residual seasonality, which may lead to improved seasonal adjustment methods. For example, BEA has recently recognized the possibility of residual seasonality in its measure of federal government defense services spending. Also, BEA is testing for seasonality in a number of not-seasonally-adjusted series from the Census Bureau’s quarterly services survey that now have sufficient time spans to which seasonal adjustment techniques can be applied.  If necessary, improvements to the seasonal adjustment methods for these series will be introduced as part of the regular annual revision to the national income and product accounts, scheduled for release in July 2015.

New FAQs Aim to Help Private Funds Determine When They Have to File a Survey to BEA for U.S. Direct Investment Abroad

Gaining a detailed picture of the role the United States plays in the global market place is made easier by the wealth of international investment statistics produced by the Bureau of Economic Analysis.  So it’s critically important that we get the most accurate information possible from businesses, private funds, and others who fill out our BEA surveys.

To that end, BEA recently released some guidance on when private funds may need to fill out a BE-10 survey, which collects information on U.S. direct investment abroad.  The guidance is in the form of several Frequently Asked Questions (FAQs).

The new FAQs answer questions such as:

  • How do I contact BEA if I have specific questions about how to report my U.S. and foreign-based entities (private funds, operating companies, etc.) on the 2014 BE-10 survey?
  • Are the data reported on the BE-10 survey kept confidential?
  • Does the 2014 BE-10 reporting overlap with the Treasury International Capital (TIC) reporting for private funds?
  • How do I complete a survey for a foreign affiliate entity if it is a private fund versus an operating company? The 2014 BE-10 survey forms may have numerous questions which do not appear to apply to my domestic and foreign funds/entities. How do I proceed?
  • How do I determine which U.S.-based private fund entity or manager would be the U.S.  Reporter that is required to complete the 2014 BE-10A Report for U.S.  Reporter?
  • If it is determined that a private fund must complete the 2014 BE-10 survey, which forms are required?
  • My company/client is a private fund that has foreign investment. Am I required to submit the 2014 Benchmark Survey of U.S. Direct Investment Abroad (BE-10)?

Other resources for assisting the filing of the 2014 BE-10 survey can be found here.

Coming in July: BEA to Launch New Tools for Analyzing Economic Growth

The Bureau of Economic Analysis plans to launch two new statistics that will serve as tools to help businesses, economists, policymakers and the American public better analyze the performance of the U.S. economy. These tools will be available on July 30 and emerge from an annual BEA process where improvements and revisions to GDP data are implemented. BEA created these two new tools in response to demand from our customers.

Average of Gross Domestic Product (GDP) and Gross Domestic Income (GDI)

  • BEA will launch a new series that is an average of GDP and GDI, giving users another way to track U.S. economic growth.
  • BEA will present a nominal (or current-dollar) measure of the series and an inflation-adjusted (or chained-dollar) measure of the series.
  • For current dollars, the new measure will be a simple, equally weighted average of GDP and GDI for any given quarter or year.
  • For chained dollars, the new measure will be the current-dollar value deflated by the GDP price index.
  • The new series will be available back to 1929 on an annual basis and to 1947 on a quarterly basis.
  • The new series not only provide users with another barometer on the U.S. economy but also make available series that several independent experts have recommended using in their analysis of the nation’s economic growth.
  • The new series could help account for known measurement inconsistencies between the two statistics. Those may include timing differences, gaps in underlying source data, and survey measurement errors.
  • The new statistics will be available in BEA’s interactive database as well as in the GDP news release tables.

Final Sales to Private Domestic Purchasers

  • BEA will launch a new series called “final sales to private domestic purchasers,” giving users a new tool for tracking consumer and business (or “private”) demand in the domestic economy.
  • BEA will present current-dollars, chained-dollars, quantity indexes, and price indexes for the new series.
  • The series will be derived in current dollars as the sum of consumer spending and private fixed investment, and will be derived in chained-dollars, quantity indexes, and prices indexes using BEA’s standard chain-type index calculations.
  • Statistics will be available back to 1929 on an annual basis and to 1947 on a quarterly basis.
  • Because the new series excludes the more volatile components of GDP, such as inventory investment, net exports, and government spending, it will track the more persistent movements in spending by consumers and businesses.
  • The new statistics will be available in BEA’s interactive database as well as in the GDP news release tables.

This new data tool is just one of the ways that BEA is innovating to better measure the 21st Century economy and provide business and households better tools for understanding that economy. Providing businesses and individuals with new data tools like these is a priority of the Commerce Department’s “Open for Business Agenda.”