U.S. economists have shown that faulty U.S. gross domestic product (GDP) calculations could be overstating the strength of U.S. growth.
For example, the third quarter’s 3.5% growth might actually have been only 3.3%, before even adjusting out the temporary boost Cash for Clunkers provided.
So what’s wrong with the current measurement?
New York Times: The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.
The federal agencies that compile the nation’s statistics increasingly acknowledge that they lack the detailed data needed to calculate the impact of imported goods and services as imports rise from an insignificant 5 per cent of all economic activity 35 years ago to more than 12 per cent today, not counting petroleum. As a result, many imports are valued as if they were made in the United States and therefore higher in price than their imported counterparts.
The result is that U.S. manufacturing data faces particular distortions, and offshored jobs can be unaccounted for. Read the full article here.