Revising Economic Growth Estimates
May 1, 2002
It was announced last week that the nation's real gross domestic product (GDP) grew 5.8 percent in the first quarter. Unfortunately, it will be a long time before we really know how well the economy is doing. This GDP report was only the first of many official growth estimates to come.
- On May 24, we will get another estimate of first quarter GDP based on more complete data from January and February, and a bit from March.
- It will not be until June 27 that the Commerce Department has sufficient data to produce a final estimate for first quarter growth -- which could be considerably higher or lower.
- But Commerce Department economists will continue revising the GDP data literally forever.
Every few years, they produce new figures going all the way back to 1929.
This results from continuing research that uncovers new information as well as improvements in measurement and economic theory.
These ongoing revisions can often change our knowledge of the past quite dramatically. For example, in 1970, Arthur Laffer, who was chief economist for the Office of Management and Budget, prepared a forecast for gross national product in 1971 of $1,065 billion -- well above the $1,050 billion estimate of most forecasters.
Contemporary estimates for 1971 put GNP at $1,047 billion -- close to the consensus forecast. But it is now recorded as $1,136 billion -- far above Laffer's forecast.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, May 1, 2002.
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