Every five years, the Bureau of Economic Analysis combs through the annals of history to revise past GDP figures.
This time, the BEA will add R&D and royalties from film, television, literature, and music into GDP accounts, painting a sunnier picture of our economic history.
Deutsch Bank economist Joseph LaVorgna wrote his thoughts in a new letter to clients:
The net effect could be a 3% upward revision to the level of output. However, of greater significance to us (as well as the Fed and financial markets) will be the change in growth, rather than the outright level. This is what makes Q2 GDP estimates so difficult to forecast. Based on the recent and substantial upward revisions to nonfarm payrolls, we believe the growth rate of GDP will be revised modestly higher over the past several years. This is a separate issue from the overall level being revised higher.
But it is important to downplay the Q2 GDP figures until we see the full spate of revisions from the BEA, LaVorgna writes.
“We should point out that in our Q2 GDP forecast, private domestic final sales are still slated to rise +2.6%,” he writes, “which is a decent pace considering the fact that the economy experienced so much first half fiscal drag.”
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