GDP: Another fake Increase

[unlawflcombatnt]

Today's 1st quarter GDP report showed an "increase" in 1st quarter GDP of +0.9%. This was an upward revision of the previous +0.6% estimate from 4/30/08. The upward revision added +$8.8 billion to the earlier estimate.

However, this upward revision was almost entirely the result of a reduction in US purchase of imports. Since imports subtract from GDP, the downward revision of $25.4 billion actually adds +$25.4 billion to GDP growth. To put it another way, the fact that Americans purchases "decreased" resulted in an "increase" in economic growth. This is a typical of the manipulations the government uses to overstate economic growth.

Not only is this a typical distortion of our economy, even the explanation of the reason for the "increase" deceiving. A perfect example of this deceptive language is provided by Briefing.com, in the following statement:

"The revised rate of 0.9% for Q1 GDP was due to an upward revision to net exports...."

Though the statement is technically true, it is deliberately deceptive. Net imports are the difference between exports and imports, or
Exports - Imports = Net Exports.

In fact, actual exports declined by -$9.7 billion. However, since there was an even larger -$25.4 billion decline in imports, it resulted in
an "upward revision to net exports".

-$9.7 billion - (-$25.4 billion) = +$15.7 billion

Since most Americans are struggling financially, their purchase of imports has declined significantly. These changes are shown in the graphic below from a copy of Briefing.com's GDP report, showing both the current numbers and the numbers prior to revision (labeled 4/30/08).

The numbers for Net Exports (or trade balance), total Exports, and total imports are in red. The changes from the upward revisions are shown in purple with purple arrows showing the direction of change.



The official numbers for 1st quarter GDP from the BEA can be found for the "advanced" report on page 7, Table 3 from 4/30/08 and on page 8, Table 3 for today's "preliminary" report (5/29/08).

Any claims being made by the Financial media that exports are increasing are false. Exports declined -$9.7 billion. The trade deficit improved only because of the huge decline in imports. Again, the import decline is almost the entire reason for the upward revision of 1st Q GDP from 0.6% (from 4/30/08) to 0.9% (on 5/29/08). Another factor contributing to the change is the +$4.7 billion revision of FOOD purchases by Americans, from the previous -$1.6 billion decline up to a +$3.1 billion increase. Thus, the combined addition of decreased import purchases and increased food purchases added a whopping +$30 billion to our 1st quarter GDP. Despite these revisions, the overall upward revision was only +$9.6 billion.

The reason the "increase" was no larger is because nearly every other area declined. Motor vehicle sales fell by -$2.5 billion. Personal Consumption Expenditures were changed less than a fraction of a %. The major reason our GDP "increased" is because our purchase of imports "decreased." Another concocted case of economic "growth" while the economic status of most Americans worsens.

[whistle]

1. Inflation is being grossly understated which is why they can show growth

[unlawflcombatnt]

6. understating Inflation is usually the biggest distortion

In yesterday's report, however, the biggest effect was the -$25.4 billion im import purchases. Add in the inflation factor, and the problem overstatement of GP becomes even worse.

[whistle]

9. Exactly, although this is further masked by the suppression of many of

...the economic statistics that used to be readily available and are now at best only guesses

[MercutioATC]

2. My favorite was the the April CPI numbers.

Most prices were relatively flat except food and fuel (and I concur).

The government's numbers allowed that food was up but made a "seasonal" adjustment to energy price increases. Energy costs were up over 5% in April, but the "adjustment" actually showed them as declining.

As a result, the CPI still went up, but less than forecast, so everybody was happy.


:wtf:

[unlawflcombatnt]

5. CPI, another government manipulated statistic

Again the Bureau of Economic Analysis uses its own 2.6% inflation measure, when the Bureau of Labor Statistic puts the year-over-year Consumer Price Index increase at a still understated 3.9%

Just removing the import revision puts the GDP growth at almost zero. If they were using the real inflation numbers, instead of their "mark-to-model" inflation numbers, GDP would clearly be negative.

[unlawflcombatnt]

3. Without the Import Decline, GDP growth would be almost 0

Just for completeness, it should be noted that the import & export numbers are from the Bureau of Economic Analysis (BEA). Trade balance numbers are also reported by the Census Bureau. The Census Bureau numbers are usually the final word on the trade balance, imports, and exports.

The Census Bureau's most recent report can be found at the following link:
http://www.census.gov/foreign-trade/Press-Release/current_press_release/exh1.pdf

For the month of March, the Census Bureau reports that US imports fell -$6 billion. That's an annualized decline of -$72 billion. That's an additional

Again, the main reason for our 1st quarter GDP increase of $26.2 billion, or +0.9% annualized, was the decline in imports of -$13 billion, or annualized -$52 billion, for an annualized addition to GDP of +$0.44%.

The change in imports from the initial Q1 estimate was -$25.4 billion, going from +$12.4 billion on the 1st report down to -$13.0 billion on today's report. This is a change of 0.87%.

Without the import change made today, the 1st quarter GDP increase would have been only $0.8 billion, not $26.2 billion. This would have made 1st quarter GDP growth only +0.027%, instead of +0.90%.

In other words, without today's change in import numbers, 1st quarter GDP would have been approximately 0.

Economic Populist Forum

[Muttocracy]

4. I thought this was going to be a post about extra new trolls in GD: P

I think it's time for zzzzz :boring:

[TheWatcher]

8. Sleep Away.

It won't change the reality of what he posted.

[Stuart G]

7. They fake the numbers so they don't have to deal with the R word.

The recession is here, now. We all know it. With people driving less for the first time in 20 years, and inflation almost out of control, we are in deep trouble. Just cause the government does not say we are in a deep recession, doesn't mean it is the truth.

[unlawflcombatnt]

10. Yes

It's truly astounding that a -$25.4 billion downward revision to total consumer spending morphs into a +$25.4 billion addition to GDP growth. Since a certain subset of consumer spending decreased, our economic "growth" increased. The government really outdid itself on this one.

According to this logic, if Americans reduced spending on imports enough, we'd have fantastic economic "growth."

In reality, the only remaining "growth" sector in our economy is in the production of economic mythology and economic fiction writing.

[Indenturedebtor]

11. And the ripple hasn't come back this way yet either

A reduction in imports means that other nations will feel yet more pain, and send less money our way as well.

I'm afraid the toilet that is our economy will have to flush completely before we start an "upswing" again. Hang on folks! It's gonna be a bumpy ride!

[unlawflcombatnt]

15. Good phrase

"The toilet that is our economy."

The toilet certainly does need to flush completely. But with Bernanke dropping more garbage into the toilet every week, by giving US Treasuries to Wall Street financiers in exchange Asset Backed Security waste material, it'll take a lot longer to empty the toilet.

[unlawflcombatnt]

12. Trade Balance: the BEA vs. the Census Bureau

In the OP, the import & export numbers are from the Bureau of Economic Analysis (BEA). Trade balance numbers are also reported by the Census Bureau. The Census Bureau numbers are usually the final word on the trade balance, imports, and exports. Often, however, Census Bureau numbers are not available for the most recent period included in the GDP report. In those cases, the BEA simply guesses at the number, and then uses it in the GDP report.

The Census Bureau's most recent report can be found at the following link:
http://www.census.gov/foreign-trade/Press-Release/current_press_release/exh1.pdf

For the month of March, US imports fell -$6 billion. That's an annualized decline of -$72 billion.

Again, the main reason for our 1st quarter GDP increase of $26.2 billion, or +0.9% annualized, was the decline in imports of -$13 billion, or an annualized -$52 billion, for an addition to GDP of +$0.44%.

In fact, the change in the import total from the original Q1 estimate was -$25.4 billion, declining from +$12.4 billion on the 1st report (on 4/30/08), down to -$13.0 billion on today's report. This is a change of 0.87%.

Without the import change, the 1st quarter GDP increase would have been only $0.8 billion, not $26.2 billion. This would have made 1st quarter GDP growth only +0.03%, instead of +0.90%.

In other words, without today's change in import numbers, 1st quarter GDP would have been approximately 0.

[hfojvt]

13. did exports really decline, or did the value just go down?

If the value of the dollar fell in that quarter, then the same amount of, say cigarettes, could be bought for fewer dollars. But no, that's wrong, because it's the same amount of dollars, but fewer Euros. It's odd that exports would decline when the value of the dollar is going down.

[unlawflcombatnt]

14. The Export increase from 4/30/08 was revised downward

On the 1st GDP report from 4/30/08 (the "advanced" report), exports for the 1st quarter were listed as increasing by +$19.7 billion. On yesterday's revision (the "preliminary" report), the export gain was revised downward to only +10.0 billion. This is where the -$9.7 billion downward revision of exports came from.

[marmar]

16. They're having a harder and harder time making the Pyramid Scheme look legit, tho.....

.... The game is just about over.

[unlawflcombatnt]

17. That's for sure

Credit and Home Equity Loan financed spending have pretty much been tapped out. Consumer spending has nowhere to go but down, and it'll take production demand and labor demand down with it.