Posts Tagged 'gross domestic product'

Why Does BEA Revise GDP Estimates?

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.

BEA Works to Mitigate Potential Sources of Residual Seasonality in GDP

The Bureau of Economic Analysis (BEA) is working on a multi-pronged action plan to improve its estimates of gross domestic product (GDP) by identifying and mitigating potential sources of “residual” seasonality. That’s when seasonal patterns remain in data even after they are adjusted for seasonal variations.

Each spring, BEA conducts an extensive review–receiving updated seasonally adjusted data from the agencies that supply us with data used in our calculation of GDP. Most of the data the feeds into GDP is seasonally adjusted by the source agency, not BEA. At the same time, BEA examines its own seasonal factors for those series that BEA seasonally adjusts itself. All that work takes place in preparation for BEA’s annual revision to GDP and its major components, which will be released on July 30.

As a result of this ongoing work, BEA is aware of the potential for residual seasonality in GDP and its components, and the agency is looking for ways to minimize this phenomenon.

• One of the areas we’re currently reviewing is possible residual seasonality in measures of federal government defense services spending. Initial research suggests that the first and fourth quarter growth rates are lower on average than those of the third and second quarters. BEA is developing methods for addressing what it has found.
 • Time frame to implement: Improvement will take place with the release of second quarter GDP on July 30. Period covered: 2012, 2013, 2014, and forward.

• BEA also will begin adjusting certain inventory investment series that currently aren’t seasonally adjusted.
 • Time frame to implement: Improvement will take place with the release of second-quarter GDP on July 30. Period covered: 2012, 2013, 2014, and forward.

• Also as part of this year’s seasonal adjustment review, BEA is planning to seasonally adjust a number of series from the Census Bureau’s quarterly services survey that now have sufficient time spans to which seasonal adjustment techniques can be applied. Currently, these series are smoothed using a four-quarter moving average to attempt to smooth out seasonal trends in the data. While BEA’s review had not identified residual seasonality in the PCE services estimates, applying statistical seasonal adjustment techniques to these indicators will improve the accuracy of the underlying trends in PCE estimates.
 • Time frame to implement:  Improvement will take place with the release of second quarter GDP on July 30.  Period covered 2012, 2013, 2014, and forward.

• BEA will review all series entering the GDP calculations to identify, and where feasible, mitigate any residual seasonality within its existing seasonal adjustment methodologies.
 • Time frame to implement: Review will take place with the release of second-quarter GDP on July 30. Period covered: 2012, 2013, 2014, and forward.

• Longer term–beyond July 30–BEA will continue looking at components of GDP to determine if there are opportunities to improve seasonal adjustment methodologies.  Should BEA identify other areas of potential residual seasonality, BEA will develop methods to address these findings. If research suggests that residual seasonality originates with already seasonally adjusted source data, BEA will work alongside its source data agencies to determine the appropriate course of action.

Additional information will be available in an upcoming article in BEA’s Survey of Current Business that’s slated to be published in mid-June.

GDP Up Slightly in First Quarter

Real gross domestic product (GDP) increased 0.2 percent in the first quarter of 2015, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2014, real GDP increased 2.2 per- cent. In the first quarter, the dollar strengthened against major currencies, imports and exports were delayed be- cause of labor disputes in key ports, energy prices declined, and several regions experienced severe weather.

April 29 GDP Q2Q

First-quarter GDP highlights
The following contributed to the increase in real GDP:

  • Consumer spending increased, mainly on household services.
  • Inventory investment increased, notably in the nondurable-goods manufacturing industry.

These positive contributions to real GDP growth were largely offset by the following:

  • The trade deficit widened in the first quarter, reflecting a decline in goods exports.
  • Business investment declined, notably in mining exploration, shafts, and wells.
  • State and local government spending declined.

Personal income and personal saving
Real disposable personal income (DPI)—personal income adjusted for inflation and taxes—increased 6.2 percent in the first quarter, compared with 3.6 percent in the fourth quarter of 2014. Personal saving as a percentage of current-dollar DPI was 5.5 percent, compared with 4.6 percent.

Q2Q Percent change April 29

First-quarter prices
Prices of goods and services bought by U.S. resi- dents decreased 1.5 percent in the first quarter, after decreasing 0.1 percent in the fourth quarter of 2014. The first-quarter decline was the largest since the first quarter of 2009.

Energy prices declined more than in the fourth quarter. Food prices also fell.

Excluding food and energy, prices increased 0.3 percent in the first quarter after increasing 0.7 percent in the fourth quarter.

For more information, read the full report.