GDP

by Larry Levin


As I pointed out in several recent economic reports, the BLS (Bureau of Labor & Statistics) will often revise prior reported data to much worse levels of activity. The GDP report is not immune. In fact, the surprise in Friday's GDP release was not the good "current" level of "growth," but rather the massive revisions to prior data - some as old as 3-years ago.

Mish's Blogspot has a good rundown of these massive revisions as well as other info, all of which can be found here but some highlights follow...

Revision Lowlights

* For 2006-2009, real GDP decreased at an average annual rate of 0.2 percent; in the previously published estimates, the growth rate of real GDP was 0.0 percent. From the fourth quarter of 2006 to the first quarter of 2010, real GDP increased at an average annual rate of 0.2 percent; in the previously published estimates, real GDP had increased at an average annual rate of 0.4 percent.

* For the revision period, the change in real GDP was revised down for all 3 years: 0.2 percentage point for 2007, 0.4 percentage point for 2008, and 0.2 percentage point for 2009.

* For the revision period, national income was revised down for all 3 years: 0.4 percent for 2007, 0.6 percent for 2008, and 0.4 percent for 2009.

* For the revision period, corporate profits was revised down for all 3 years: 2.0 percent for 2007, 7.2 percent for 2008, and 3.9 percent for 2009.

* For 2007, the largest contributors to the revision to real GDP growth were a downward revision to PCE, an upward revision to imports, and a downward revision to state and local government spending;

* The percent change from fourth quarter to fourth quarter in real GDP was revised down from 2.5 percent to 2.3 percent for 2007, was revised down from a decrease of 1.9 percent to a decrease of 2.8 percent for 2008, and was revised up from an increase of 0.1 percent to an increase of 0.2 percent for 2009.

* National income was revised down for all 3 years: $51.8 billion, or 0.4 percent, for 2007; $77.4 billion, or 0.6 percent, for 2008; and $55.0 billion, or 0.4 percent, for 2009. For 2007, downward revisions to corporate profits and to supplements to wages and salaries were partly offset by an upward revision to wages and salaries.

* Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- was revised down for all 3 years: $15.4 billion for 2007, $15.0 billion for 2008, and $79.1 billion for 2009. For all 3 years, downward revisions to PCE more than accounted for the revisions to personal outlays. The personal saving rate (personal saving as a percentage of DPI) was revised up for all 3 years: from 1.7 percent to 2.1 percent for 2007, from 2.7 percent to 4.1 percent for 2008, and from 4.2 percent to 5.9 percent for 2009.

This is just a sample of the many pages of revisions, and with the coming corporate inventory growth slowdown I would suspect Friday's GDP number to be revised too - perhaps often.



Previous Day's Trading Room Results:

Trade Date: 7/30/10

E-Mini S&P Trades*
(before fees and commissions):


1) VA buy @ 9:24 at 1093.50 = +1.00 & +2.50

2) Algorithm positions (10)

3) “Reading the Tape” positions (9) …combined Secret’s, Algo, & “Reading the Tape” total +15.50



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