Post by unlawflcombatnt on Dec 21, 2006 15:49:43 GMT -6
I thought I'd add this post on GDP revisions for completeness.
I apologize in advance for a post that's almost incomprehensible (at least without posting the actual charts here). I'll try to add them later, or simply repost this with the copied charts included. It took me quite awhile to sort through the Bea's revisions, and see what they'd actually changed. Suffice to say, the published "revisions" are far more ominous than it initially appears. The most important "revision" from the initially published GDP report on 10/27/06 (the "advanced" report) is the huge decline in Personal Outlay spending financed by wages, and the huge increase in the amount financed with borrowed money.
Today's GDP release showed some slight downward revision to the real GDP from the "preliminary" results released in November. The previous 3rd quarter increase of 2.2% was revised down to 2.0%. Final sales of GDP was revised downward from 2.1% to 1.9%.
More notable, however, are the revisions from the initial ("advanced") report on the GDP from October 27, 2006. Though the current dollar GDP was revised upward by $14.3 billion ( from $13.3083 trillion to $13.3226 trillion ), Personal Outlays were revised slightly, downward by $5 billion from $9.715 trillion to $9.710 trillion. Thus despite the increase in the revision, consumer spending was slightly less than originally reported.
Most remarkable, however, was that Disposable Personal Income was revised downward by $70 billion, from the originally published $9.6685 trillion to $9.5983 trillion. Combined with the $5 billion reduction in Personal Outlays, this means that $65 billion more of our 3rd quarter GDP growth came from "dis-savings" (borrowed money) than was originally published. Thus, the current upward revision was more than compensated for by the increase in Personal Outlays that were financed through borrowing. In fact, if we subtracted only the money from upward revision of Personal Outlays financed by borrowing, the GDP revision would be revised downward to only $13.2576 trillion, or $50 billion less than the initially stated GDP increase for the 3rd quarter. (from the "advanced" report)
(The GDP information can be found at the links below. The gross totals for the GDP can be found in Tables 3. The "Personal Income and Its Disposition" can be found in Tables 10 at the links below. I'll try to insert actual copies of the involved tables later on.)
GDP-BEA-10/27/06
GDP-BEA-12/21/06
Clearly our GDP "growth" is being financed progressively more with borrowed money, and progressively less with wages. This is obvious from the big picture alone. The initial 3rd quarter GDP growth of 1.6% was revised upward to 2.0%, while Disposable Personal Income was revised downward by 0.8%. To put this differently, GDP was revised upward, consumer spending was revised little, and Disposable Personal Income revised downward a lot. If spending is essentially unchanged, and income declines a lot, the difference is made up for by spending financed with borrowed money.
The major point here is that our economic "growth" is being driven by consumer spending increases financed with borrowed money, not by increased wages.
Can this really be considered a "Goldilocks economy"? Is this evidence of an economy that is "strong, and getting stronger"?
I apologize in advance for a post that's almost incomprehensible (at least without posting the actual charts here). I'll try to add them later, or simply repost this with the copied charts included. It took me quite awhile to sort through the Bea's revisions, and see what they'd actually changed. Suffice to say, the published "revisions" are far more ominous than it initially appears. The most important "revision" from the initially published GDP report on 10/27/06 (the "advanced" report) is the huge decline in Personal Outlay spending financed by wages, and the huge increase in the amount financed with borrowed money.
Today's GDP release showed some slight downward revision to the real GDP from the "preliminary" results released in November. The previous 3rd quarter increase of 2.2% was revised down to 2.0%. Final sales of GDP was revised downward from 2.1% to 1.9%.
More notable, however, are the revisions from the initial ("advanced") report on the GDP from October 27, 2006. Though the current dollar GDP was revised upward by $14.3 billion ( from $13.3083 trillion to $13.3226 trillion ), Personal Outlays were revised slightly, downward by $5 billion from $9.715 trillion to $9.710 trillion. Thus despite the increase in the revision, consumer spending was slightly less than originally reported.
Most remarkable, however, was that Disposable Personal Income was revised downward by $70 billion, from the originally published $9.6685 trillion to $9.5983 trillion. Combined with the $5 billion reduction in Personal Outlays, this means that $65 billion more of our 3rd quarter GDP growth came from "dis-savings" (borrowed money) than was originally published. Thus, the current upward revision was more than compensated for by the increase in Personal Outlays that were financed through borrowing. In fact, if we subtracted only the money from upward revision of Personal Outlays financed by borrowing, the GDP revision would be revised downward to only $13.2576 trillion, or $50 billion less than the initially stated GDP increase for the 3rd quarter. (from the "advanced" report)
(The GDP information can be found at the links below. The gross totals for the GDP can be found in Tables 3. The "Personal Income and Its Disposition" can be found in Tables 10 at the links below. I'll try to insert actual copies of the involved tables later on.)
GDP-BEA-10/27/06
GDP-BEA-12/21/06
Clearly our GDP "growth" is being financed progressively more with borrowed money, and progressively less with wages. This is obvious from the big picture alone. The initial 3rd quarter GDP growth of 1.6% was revised upward to 2.0%, while Disposable Personal Income was revised downward by 0.8%. To put this differently, GDP was revised upward, consumer spending was revised little, and Disposable Personal Income revised downward a lot. If spending is essentially unchanged, and income declines a lot, the difference is made up for by spending financed with borrowed money.
The major point here is that our economic "growth" is being driven by consumer spending increases financed with borrowed money, not by increased wages.
Can this really be considered a "Goldilocks economy"? Is this evidence of an economy that is "strong, and getting stronger"?