Downward Revision in 2nd Quarter GDP?

Secretary of the Treasury Geithner in the NYTimes on August 2:

While the economy has a long way to go before reaching its full potential, last week’s data on economic growth show that large parts of the private sector continue to strengthen. 

Catherine Rampell at the NYTimes blog Economix on August 3:

On Friday, in its preliminary estimate of gross domestic product, the Bureau of Economic Analysis said it believed the economy grew at an annual rate of 2.4 percent last quarter. 

…G.D.P. numbers go through several revisions as the bureau receives more complete data, and it now looks as if the revisions may be significant. According to the June factory order data, released today, the number the bureau used to calculated the inventory component of G.D.P. was way off.

As a result, economists are predicting that the second quarter G.D.P. number will be revised downward from 2.4 percent to somewhere around 1.7 percent.

Previous revisions to GDP show the recession began earlier and had a deeper trough than first thought. Moreover, on balance, the previous revisions also suggest that the recovery has been even weaker than first thought. If the argument above holds up, that trend will continue. The news is not good.

GDP is lower today than it was at its peak in 2007.


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