Free Republic

In March 2013, the U.S. government invented a new way of calculating GDP. The Financial Times reported that starting from July 2013, U.S. GDP would become 3% bigger due to a change in statistics. As this adjustment in GDP calculation is pretty significant, I will discuss the new items in the U.S. GDP, what the consequences are and how investors should act on this revision in statistics.GDP = private consumption + gross investment + government spending + (exports − imports), orThe government made a significant change in the gross investment number (I), which now includes R&D spending, art, music, film...

In a blog post published this morning, the White House explains why historic economic data has been updated. "The comprehensive revision to the national accounts, which is the first since July 2009, includes additional source data received by the Bureau of Economic Analysis, as well as methodological changes designed to better reflect the evolving nature of the U.S. economy," writes Alan B. Krueger, chairman of the Council of Economic Advisers. "This morning the Bureau of Economic Analysis released a comprehensive revision to the National Income and Product Accounts, covering the full history of data since 1929. The revision showed that...

The Commerce Department has made changes to how it calculates gross domestic product, designed to have the data better reflect the so-called knowledge economy. The U.S. government adjusted data all the way back to 1929, and other countries have or are about to make similar changes to their data.