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GDP Grew 4.1% (Thanks To New Gov’t Standard?)

From the unquestioning (or just uninformed) kids at the Washington Post’s Wonkblog:

Wow! GDP grew a whopping 4.1 percent in the third quarter

By Neil Irwin | December 20, 2013

The late summer months, it now appears, were a period of rip-roaring economic growth in the United States.

Who are you going to believe? The US government or your lying eyes?

In the third and final revision of third-quarter GDP numbers, the Commerce Department now estimates that output rose at a 4.1 percent annual rate in the July-through-September quarter. It had previously estimated growth at 3.6 percent. That makes last summer the second-best quarter for growth since before the recession in 2007…

Naturally, the Washington Post (nor any of the rest of the news mention) will mention that the Obama administration changed the standard for measuring GDP to include research and development and intellectual property, as well as other things that were never counted before.

In fact, we were told last summer that this alone could increase the GDP by 3%. (See the article below.)

The stronger revision was driven overwhelmingly by personal consumption spending…

Remember when consumer spending was a terrible thing?

And while the quarter covered in this revision ended way back in September, it gives reason for optimism that Americans – -girded by a rising stock market and housing wealth, a steadily improving job market and falling debt burdens — are in increasingly solid shape.

The third quarter may be ancient history, but the more we know about it, the more it points to a merry Christmas and happy New Year, indeed.

Meanwhile, lest we forget, we had this warning via the July edition of Inc.Magazine:

Look Out for a Big Change in GDP Calculations

New standards require adding R&D and intellectual property spending to GDP calculations.

By Erik Sherman | July 31, 2013

By early August, I can confidently predict that U.S. GDP will take a jump. A big one. It’s going to shoot up on the order of 3 percent, because the U.S. Commerce Bureau of Economic Analysis will change a key part of the GDP definition

Currently, we count spending on R&D and on the creation of entertainment, literary, and artistic originals as intermediate inputs used up during the production of other goods and services. As a result, the contribution of these important innovative activities to economic growth and productivity is difficult to measure…

The big change is that now R&D in all fields will become treated as capital expenses and part of the wealth of nations…

[R]elatively few countries have implemented this new international GDP standard and definition…

Europe hasn’t implemented this change, for instance. But Cuba and China and the old Soviet Union and the Eastern Bloc countries used to do this sort of thing all the time.

This article was posted by Steve Gilbert on Tuesday, January 7th, 2014. Comments are currently closed.

2 Responses to “GDP Grew 4.1% (Thanks To New Gov’t Standard?)”

  1. They must be using that new common core progressive math. You know, where 2+2=6… as long as you have a long-winded technobabbly explanation on “how you got there”.

  2. Petronius

    Messaging, manipulation of data, and Fed money printing can only take you so far.

    The pathetically sluggish “recovery” –– which has largely been driven by consumer debt spending –– is now drawing to a close, and the economy is sinking again.

    Over 100 companies on the S&P 500 Index have issued earnings outlooks for the fourth quarter. Of these companies, over 85% have issued negative guidance.

    That makes seven consecutive quarters in which the number of companies issuing negative guidance has increased.


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