Friday, February 25, 2005


Today's GDP revision

Today's GDP revision from 3.1 to 3.8 for Q4-2004, shows yet again that the government keeps underestimating the strength of the economy. This is the Rodney Dangerfield economy-- it just gets no respect! With this consistent underestimation, one really has to wonder that if the economy turns sour, will the government data really be able to tell us? If they fix their GDP estimation models so that their upward revisions become narrower, will that mean the models will later tell us things are OK when they're not?

I knew this one would be revised based on the employment data and the Institute for Supply Management (ISM) reports of that period. The ISM surveys have been calling this right all along. (

My guess is that the GDP models do not account for small business the way they should now. The economy has changed so much because of communications tech that small businesses can be a far more powerful force than they once were.

Click on the title of this note (Today's GDP revision) to go to the official GDP press release from the Bureau of Economic Analysis.

I have no comments. I just wanted to be the first to "blog" Dr Joe. I thought it said "flog" Dr Joe.

Frank Romano
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