Saturday, July 30, 2011

CMI: "Great Recession Far Worse Than We Were Previously Told"

The Real Problem

The greatest problems in the report, however, were the massive revisions to past history -- including the very recent past. For both the first quarter of 2011 and the worst quarters of the "Great Recession" those revisions were substantial enough to raise questions about the reliability of any of the recently reported BEA data:

-- Data published as recently as 35 days prior had growth rates slashed by over 80%.

-- The worst quarter of the "Great Recession" was revised downward by over 2%, with the annualized "growth" rate now reported to be a horrific -8.9%. And the "peak" to "trough" decline in real GDP for the "Great Recession" is now recognized to be over 5%, halfway to the clinical definition of a full depression.

We have been concerned for some time about the timeliness of the BEA's data, particularly given how much the nature and dynamics of the economy have changed since Wesley Mitchell initially developed the data collection methodologies in 1937. These past revisions, however, lead us to believe that the problems run far deeper -- as demonstrated by a quarter that is now over 2 years old being just now revised downward by an additional 2%. This begs two simple questions:

-- At what point in time can we trust any of the data contained in these reports?

-- How can any of the current data be used to create meaningful Federal monetary or fiscal decisions?

We wonder what Mr. Bernanke thought when told that 80% of his "relatively slow recovery" during the first quarter had just vaporized ...


UPDATE

Edward Harrison at Credit Writedowns: Disastrous GDP numbers make double dip scare real


2 comments:

TomatoBasil said...

If lawmakers and regulators in Washington paid attention to economic indicators when making policy choices the inaccuracy would be a problem.

pce said...

I wonder how much of the deterioration in quality of statistics is due to budget cuts for the relevant bureaucracies?
Presumably a Tea Partier really wouldnt care if we had this data since they dont believe in activitist fiscal or monetary policy