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Today the Third Estimate of GDP from the BEA is an increase of 3.1 percent at an annualized quarterly rate.

GDP

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.8 percent. The update primarily reflected upward revisions to exports and consumer spending that were partly offset by a downward revision to private inventory investment. Imports, which are a subtraction in the calculation of GDP, were revised up.

A Word About Imports

Please note that imports have no impact on GDP and cannot by definition. The D in GDP stands for Domestic.

The BEA’s statement “Imports, which are a subtraction in the calculation of GDP, were revised up,” is accurate but misunderstood.

The BEA subtracts imports in its calculation because it erroneously add imports to GDP when it shouldn’t.

For example, you buy something from Amazon. What percentage of that product is from the US and what is foreign? Apply that question across all of retail sales which add to GDP.

Because the BEA inaccurately adds imports to GDP, it needs to subsequently subtract imports.

Real GDP, Real Final Sales, Real GDI Billions 2024-Q3

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Gap Between Real GDP and Real GDI

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GDP vs GDI

GDP and GDI are two measures of the same thing. The measure of product sold should match the measure of income and wages produced.

The Philadelphia Fed and others have concluded that GDI is a more accurate measure and I agree.

But GDI lags GDP by one month in Q1, Q2,and Q3. GDI lags by two months in Q4. We will not see GDI until the third estimate for Q4.

Instant Gratification

Because the market always wants instant gratification, we look at GDP instead of GDI.

The same applies to BLS monthly jobs reports are grossly distorted estimates vs QCEW data that encompasses a 95% of the data.

The monthly jobs reports are so bad, the BLS would do everyone a service if it stopped producing them. The same applies with GDP and GDI.

Is Growth 2.1 or 3.1 Percent?

Those who believe the income side of things is more accurate will suggest 2.1 percent.

November 28: Huge Negative Revision of $91.8 billion to Second-Quarter Private Wages

The BEA hugely revised GDI to the downside. Hmm. It seems that voters weren’t fooled.

The reason for the November 28 negative revision is enlightening.

The BEA explained “Today’s release presents revised estimates of second-quarter wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program [QCEW].”

Mish July 26, 2024: Expect the BLS to Revise Job Growth Down by 730,000 in 2023, More This Year

At the heart of these revisions is a horribly flawed birth-death model used by the BLS. My calculation closely matches an estimate by Bloomberg’s chief Economist.

Mish August 21, 2024: BLS Revises Jobs Down by 818,000 the Most Ever, About 68,000 Per Month

Do I get to say I told you so? My advance estimate a month ago was 779,000 lower. Bloomberg estimated 730,000.

Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement

On November 20, I commented Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement

My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.

The BLS Birth-Death model is seriously messed up an/or the BLS is oversampling large corporations and under sampling small businesses.

The BLS monthly nonfarm payroll reports are consistent garbage.

December 6: Employment Drops by 355,000 But Jobs Rise by 227,000 in November

The strange jobs reports continue as the divergence between jobs and employment widens again.

I repeat, BLS monthly jobs reports are so bad that the BLS ought to do away with them.

Industrial Production September

On October 17, I noted Industrial Production Unexpectedly Declines 0.3 Percent With Huge Negative Revisions

Industrial production declined 0.3 percent in September. Negative revisions lopped off another 0.5 percent.

Industrial Production November

On December 17, I noted The Fed Releases Another Grim Set of US Industrial Production Numbers

Industrial production is below the January 2008 level. Manufacturing is even more abysmal.

The Inflation Reduction Act, cleverly timed to keep things humming through through the election, helped pad demand for manufacturing durable goods, now crashing.

Expect more negative revisions because they are coming. Meanwhile, enjoy the upward revision to GDP while you still can.

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