Not the Topic: Revision of GDP

In this morning's 4AM post we looked at Interpreting Deviations from Okun’s Law. According to the article, Okun's law appears not to stand up when you look at real-time GDP data. But when you go back later and look at the revised GDP numbers, Okun's law holds up well.

My real interest is in the loops that they describe. But this stuff about "revision" is fishy. They don't explain that part. And if, like me, you don't know what they don't tell you, the stuff about revising the data can make you wonder what's going on.

I found an article that explains it: at 538, The Messy Truth Behind GDP Data by Andrew Flowers:

From the initial estimate to the first revision, the average absolute change is a little over 0.50 percent. From the first to the second revision, it changes on average nearly a quarter percentage point.

What’s most astounding is how much GDP changes from the third “real time” estimate to its historical estimate as refined by annual and benchmark revisions: nearly 1.5 percentage points. To put that in context, the average quarterly growth rate since 1975 is 2.7 percent. So GDP numbers in real time are, at best, a dim reflection of the state of the economy.

GDP numbers in real time are, at best, a dim reflection of the state of the economy. I think that clarifies the "revision" problem.