Each summer, the Bureau of Economic Analysis updates its Gross Domestic Product estimates to incorporate sources of data previously unavailable and make improvements in methodology – – all with the goal of providing the most accurate measure of the U.S. economy’s performance.
This year, we’ll release revised estimates for GDP and its major components on July 30. These updated figures will reflect new and revised sources of data and will incorporate the regular updates to seasonal adjustment factors as well as several statistical changes designed to reduce residual seasonality. At the same time, BEA will introduce new tools for analyzing the nation’s economy.
This annual revision process results in old estimates of GDP getting recalculated for both the quarters and years covered – from 2012 through the first quarter of 2015. BEA’s annual revisions usually cover three years. New estimates of GDP will reflect the adopted improvements.
Another improvement that will emerge from this year’s annual revision process is that the BEA – also starting on July 30 — will begin including data from a new “advance” trade report produced by the Census Bureau into our initial estimates of quarterly GDP. The data from Census’ advance trade report will mean that BEA will have actual trade data for all three months of the quarter – rather than only two months — when calculating its first estimate of quarterly GDP.
In addition to the annual revisions process, BEA also regularly updates its quarterly GDP numbers – producing three estimates for a given quarter. Each new estimate includes updated, more complete, and more accurate information as it becomes available. The first, called the “advance” estimate, typically receives the most attention and is released roughly four weeks after the end of a quarter. For example, the first estimate of GDP for this year’s January-to-March quarter came out near the end of April. The first estimate for the second quarter will come out July 30 – in concert with the annual revisions.
When BEA calculates the advance estimate, we don’t yet have complete source data, with the largest gaps in data for the third month of the quarter. In particular, the advance estimate lacks complete source data on inventories, trade, and consumer spending on services. Therefore, we must make assumptions for these missing pieces based in part on past trends. As part of this process, we publish a detailed technical note that lays out the assumptions we made for a particular estimate. With Census’ new advance trade report, BEA will be able to plug the hole on the missing trade data.
As new and more complete data become available, we incorporate that information into the second and third GDP estimates. About 45 percent of the advance estimate is based on initial, or early, estimates from various monthly and quarterly surveys that are subject to revision for various reasons, including late respondents that are eventually incorporated into the survey results. Another roughly 14 percent of the advance estimate is based on historical trends.
By the second GDP estimate, we have new data for the third month and revised data for earlier months. By the third estimate, a lot more data is available so that only 17 percent of the GDP estimate is based on information from the first set of monthly and quarterly surveys.
Once every five years, BEA produces a “comprehensive” revision to its GDP statistics, incorporating changes to how the U.S. economy is measured as well as more complete source data all the way back to 1929. The most recent comprehensive revision was 2013. New data, new methodologies, changes in definitions and classifications, and changes in presentations were all incorporated into 2013’s comprehensive GDP revision.
Measuring GDP for the U.S. economy is always a work in progress. It often takes months, or even years, for the most comprehensive and accurate data to become available. Our advance estimates strike a good balance between accuracy and timeliness, given the data available at the time. Successive revisions reflect BEA’s commitment to incorporate both more complete source data when they become available and improved methods for measuring a rapidly changing economy.