US GDP Revisions for 11 Years Coming Up: How Big Will They Be?

In January, I noted the Census Bureau had construction spending errors going back a decade. Since construction spending directly feeds BEA GDP numbers, GDP will be revised as well.

by Mish

On July 29, the BEA will post revisions for years 2013 through 2015. Other years will follow. How big will the revisions be?

Breitbart claims to know. Do they?

The Department’s Bureau of Economic Statistics (BEA) regularly makes small revisions to its published statistics as more information becomes available over time. But in a massively large adjustment, the BEA just revised downward — by $346 billion — the real (after-inflation) GDP for 50 states and the District of Columbia, covering the 11-year period from 2005 through the end of 2015.
According to BEA’s newest data, real GDP was overstated by about $125 billion from 2007 through 2008, during the period leading into the start of the Great Recession. But the overstatement shrank to about $70 billion in 2009.
During 2012 and 2013, when the U.S. economy had what some have referred to as a micro-recession, the overstatement of real GDP growth ballooned to about $275 billion. Despite over $100 billion in revisions to real GDP growth in 2014 and 2015, the overstatement continued to grow to $324 billion, or 2 percent of GDP.

Links Head Nowhere

Not a single Breitbart link heads to any BEA discussion of revisions.

Since they don’t (and I would be happy to report a correction), I am guessing, they are guessing.

From the May BEA article on “GDP and the Economy” we see …

Preview of the Upcoming Annual NIPA Revision
On July 29, 2016, the Bureau of Economic Analysis (BEA) will release the results of the annual revision of the national income and product accounts (NIPAs) together with the advance estimate of gross domestic product (GDP) for the second quarter of 2016. The revision will cover the most recent 3 years (2013 through 2015) and the first quarter of 2016. The reference year for index numbers and chained-dollar estimates will remain 2009.
In November 2015, the Census Bureau released revised monthly estimates of construction spending for January 2005 through October 2015. BEA uses these data to prepare annual estimates of private fixed investment for residential structures. For the upcoming revision, BEA will incorporate revised Census Bureau data into its annual estimates of residential improvements for 2013 through 2015. Estimates for earlier years will be revised during a future revision of the NIPAs. For details, see the FAQ “How will the revised Census Bureau construction spending data affect BEA’s quarterly and annual estimates of private fixed investment?

Old News

I did locate Excel templates for the revisions but they are blank. I fail to see how Breitbart knows the revision will be 2% on data not yet released.

The other possibility is Breitbart is linking to old news as if it is new news. The site did reference the July 31 2015 Political Calculations article Revising Away Obama’s GDP.

“Ironman” at Political Calculations provides a nice animated snapshot of what happened and when. Here is a static version incorporating all the changes.

Guessing the New Revisions

My guess is that 2014 GDP will rise but 2015 GDP will drop as a result of the revisions. I made that guess on January 5, 2016 in Diving Into the Revisions: Construction Spending Revised Lower 7 Consecutive Months! 2015 GDP Will Decline vs. Estimates: By How Much?

For more detail, I estimated third quarter GDP will be revised about .57 percentage points lower, second quarter .56 percentage points lower, and first quarter .21 percentage points higher, while noting “Those are very crude calculations that may be wildly off the mark.”

See the link for my methodology. I did not estimate 2014 other than “higher”.

Perhaps I can get “Ironman” to make some political calculations, and if so I will post them.

Mike “Mish” Shedlock