Quarterly GDP increased by 2% at an annual rate which means it increased by ½ of 1% for the quarter. Almost ¾ of that growth was the result of building inventories so we are left with about 1/2 % at an annual rate or .14% for the quarter. If the buildup in inventories represents correct entrepreneurial insight regarding better business in the future, it is a good thing. If the insight of entrepreneurs is incorrect, or if inventories are rising on fear of higher inflation and a falling dollar then it suggests further weakening in the economy. One bright spot is that equipment and software was up by 12%, although such spending was higher and rising over the previous three quarters. You also must remember that this GDP figure will be revised twice in the future and that statistics released just prior to an election are particularly suspect. Anyone know of research on this last point?
Source link: http://archive.mises.org/14429/gdp-not-so-hot/
GDP – not so hot
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” You also must remember that this GDP figure will be revised twice in the future ”
Mark – What odds would you offer that it will be revised down?
“that statistics released just prior to an election are particularly suspect”
Mark – you are becoming as cynical as I am !
Most of the time, people on this web site will discount GDP as a good measure to use (myself included). Is it too much to ask for us to stay consistent by not using it, even if it appears that it may “help” our case when the figures aren’t looking good? What makes the GDP figures, this time around, more reliable?
Agreed. Not that this GDP issue is as important, but it reminds me of conservatives suddenly supporting UN resolutions in the build-up to Gulf War II. Either one supports the UN or not. Either Austrians accept GDP as a valid figure, or they don’t.
“Either one supports the UN or not”
Support it – we own it!
I think that the GDP does say some useful things about the economy and it’s perfectly legitimate to use it. The problem I have with it is when people try to read more into it. For example, telling us what direction it’s going, what the actual expansion rate is, what the health of the economy is etc.. Taking a quick look at the “expansion” and noting that most of it is due to a build up in inventories is useful in my opinion. Pointing out that inventory growth doesn’t necessarily mean the economy is getting better is an even more useful observation.
Or perhaps the inventory buildup is unsold iPads.
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