CNBC analysis: Don't trust those GDP numbers
An in-depth analysis by CNBC of the government's reports on gross domestic product suggests large and persistent errors that should give investors, business executives and policymakers pause in relying on the data for key decisions.
CNBC looked at each quarterly report going back to 1990 and found an average error rate of 1.3 percentage points. So an initial report of 2 percent growth on average later would be revised to 3.3 percent or 0.7 percent.
The research does not show any systematic overstatement or understatement of growth, just persistently large revisions.
(Blue font mine, to try to blunt random speculation that somehow the data is biased, proving we are all (naturally) doomed). Not that that would ever happen on THIS site.
Seriously though, if proven correct, this is very interesting.
First, given how random and wrong short term economic forecasts tend to be, and given the complexity of the economy and how much it is constantly evolving, this isn't surprising, IMO. In fact, it seems intuitively obvious, given how many components of GDP are estimates.
Second, it means that economic pundits of ALL stripes leaping to all sorts of short term predictions of boom or bust on recent GDP numbers are just guesses.
That would seem to make a large proportion of this site's posts rather irrelevant.
Moulton noted that revisions are often largest around turning points in the economy, like when it's entering or exiting recession, as it was in 1992 and in 2008. And some variables are outside its control.
For example, individuals and companies are always going to file tax data late, receive extensions and amend returns. Corporate returns are often complicated.
Outside economists do not envy the bureau's task of measuring production in the $18 trillion U.S. economy. Over time, as the economy has become more service-oriented, it's become harder to measure actual output, especially when the measures include complex ideas like intellectual property.
Now - this is just one study by one news source on 25ish years of data. It might be wrong. But if it's right, since no bias suggesting obvious fixes is shown, it might, for example imply that government, the Fed, etc. should just calm down and do a lot less short term economic tinkering.
OTOH, given the attention span of voters overall and the hubris of "experts", I don't expect much to change anytime soon -- even if this were to be strongly validated as correct by several credible sources.
