US Government Officials Admit GDP, Inflation Measurements Are Incorrect

Tyler Durden's picture

First we had China's "overcooked" GDP data, then came Australia's "technical issues with jobs data," and now, with Jack Welch having questioned America's jobs data in 2012, Bloomberg reports that top officials from two US government economic-statistics agencies said their measurement tools for growth and inflation are off.

Economists for years have questioned whether statistical agencies are keeping up with changes, resulting from an increasingly digitized and innovation-based economy, that improve the quality of goods and services.

As Bloomberg reports, the answer, as per a new paper from government officials at the Bureau of Labor Statistics and Bureau of Economic Analysis: It’s hard, especially in technology and medical services where innovations can be rapid and the results hard to capture. Health-care spending represented about 17.5 percent of gross domestic product in 2014, they note.

Officials warn their measurement tools are understating growth and overstating some components of inflation by modest amounts, while cautioning that this doesn’t explain the sluggish expansion in recent years... "price index mismeasurement continues to lead to understated growth in real output over time."

Despite the BLS’s improvements in capturing changes in the economy, “our quality corrections are not as complete as they could be, so they are not taking into account some of the innovations that are actually going into the goods,” said Erica Groshen, one of the paper’s authors, who served a four-year term as BLS commissioner that ended in January.

Looking at the personal consumption component of GDP, the authors find that price measures likely show an overstatement of 0.2 percentage point in 2000, rising to 0.26 percentage point in 2015.

Combined with some mismeasurement of quality changes in computer and software investment, the total effects would mean GDP growth is understated by about 0.4 percentage point for 2000, 2005, 2010 and 2015, according to the paper.

“For GDP and productivity growth,” the paper’s conclusions “make a lot of sense but don’t really change the overall picture of a productivity slowdown,” said Julia Coronado, president of MacroPolicy Perspectives LLC in New York and a former Fed economist. “It is more of a game changer for thinking about inflationary pressures.”

Of course, over-stating inflation provides The Fed even more historical cover to remain 'easy' should the need arise.

*  *  *

Full paper below:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
bobdobolina's picture

Of course this stuff is massively incorrect hasn't anyone been paying attention to the daily indicators?

knukles's picture

Now for a Lolita Island joke to cheer everybody up:
Know why the Elites like 4 year olds?
Because their small hands make their dicks look huge.

Why's that any different than this article saying that price measurements have lead to understating growth.  Bullshit. 
That's why that say, by the by, health-care is 17.5% of the economy.  And US healthcare has fallen shy of the rest of the world for it's price, so that overstates growth, not understates it.

Just as bad as the joke.

Creative_Destruct's picture

"our quality corrections are not as complete as they could be, so they are not taking into account some of the innovations that are actually going into the goods"

Do not dispair bothers and sisters ye old hedonic indexing be off and things are actually SUPER AWESOME. 

Inflation, she be lower than measured.

Growth, she be higher than measured.

Funny how the BLS ALWAYS says their stats are flawed in UNDER MEASURING the  real AMAZINGNESS ofthe economy.

Ya, Knucks, the hands that handle the econ dick are ALWAYS shrinking.

peddling-fiction's picture

Google Shadow Stats. They can help.

But do you really wanna see reality? LOL

Stuck on Zero's picture

Quality?? Everything you buy today is shit from China. A cheap faucet used to last 30 years and then with a 10 cent washer would last another ten years. Today a good quality faucet completely corrodes through in five years and floods your house. Washers and dryers used to last thirty years. Ten years now. Same with water heaters.  Yeah, the new blender has 248 forward speeds, but it blows up after six months. Quality? Hedonics? Right.

GUS100CORRINA's picture

US Government Officials Admit GDP, Inflation Measurements Are Incorrect

My response: Must be result of OBAMA hangover. The entire 8 years of the Obama administration was one big lie from the beginning to the end. 

=== Latest Shadowstats Information ===

No. 886: Real Retail Sales and Earnings, Consumer and Producer Prices

May 16th, 2017

Annual Real Retail Sales Growth Has Resettled at Recession-Signal Level

• First-Quarter Real Average Weekly Earnings Held in Annual Decline, Along with Back-to-Back Quarterly Contractions; April Detail Was Mixed; Consumer Liquidity Stresses Continued to Intensify

• Headline CPI-U Inflation Rose by 0.17% in April 2017, Pulling Annual CPI-U Inflation Lower to 2.20% (Was 2.38%), with CPI-W at 2.14% (Was 2.35%) and ShadowStats at 10.0% (was 10.1%)

• April Final-Demand PPI Annual Inflation Hit a 62-Month High of 2.45%

• Moving Off Bottom, April Industrial Production Showed Solid Gains, but Production and Manufacturing Still Remained Below Their Pre-Recession Highs

• Declining April Housing Starts Held Shy of Pre-Recession Peak by 48.4% (-48.4%); First-Quarter Starts Revised to a Quarterly Contraction, Amidst Annual Revisions

markovchainey's picture

The government is full of shit. I'm shocked.

Ms. Erable's picture

Another no shit, Sherlock moment from .gov. They can't even show decent numbers after rigging the GDP calculation a couple years back.

Blano's picture

Has ZH said it was Trump's fault yet and implied impeachment was coming? 

Because that's what this place is turning in to. 

BeanusCountus's picture

AP - And in a followup story the Bureau of Labor and Statistics has revised its calculation of GDP to include the picking of one's nose. A spokesman for the agency noted "We looked around our deparment, saw everyone doing it, and realized the savings to future kleenex and hankerchief production must be enormous. These are the types of productivity enhancements we need to include in a truly accurate estimate of the economic activity in this country. Further, we are working to quantify the additional increase in productivity for the "flicking component", whereby the disposal adds to overall fertilizer production of the United States."

Dr. Acula's picture

"it is nonsensical to reckon national income or national wealth. As soon as we embark upon considerations foreign to the reasoning of a man operating within the pale of a market society, we are no longer helped by monetary calculation methods. The attempts to determine in money the wealth of a nation or of the whole of mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimensions of the pyramid of Cheops. If a business calculation values a supply of potatoes at $100, the idea is that it will be possible to sell it or to replace it against this sum. If a whole entrepreneurial unit is estimated $1,000,000, it means that one expects to sell it for this amount. But what is the meaning of the items in a statement of a nation’s total wealth? What is the meaning of the computation’s final result? What must be entered into it and what is to be left outside? Is it correct or not to enclose the “value” of the country’s climate and the people’s innate abilities and acquired skill? The businessman can convert his property into money, but a nation cannot." - Ludwig von Mises in Human Action

serotonindumptruck's picture

How many times must it be said?

Infinite growth on a finite planet is impossible.

We're all in a slow, downward spiral to the bottom, and if our so-called leaders don't lead us all into global thermonuclear war, then we'll all find a different way of killing each other.

It will soon become a battle for basic natural resources, such as food, water, and clean air.

One way or another, it's down to the last man/woman standing.

knukles's picture

Ohhh ohhh, I get dibs on the last chick.

CRM114's picture

You get shot.

The guy with the last gun gets the chick.

Blano's picture

What if it's Lena Dunham?

knukles's picture

OK.  That does it.  I'm out.
I'll go stand watch at the dump.

peddling-fiction's picture

Lena will be feeding and gorging at the dump knuks.

Dr. Acula's picture

Why is leisure not included in GDP computations?

"We see that men renounce advantages which they could get by working more — that is, that they are ready to make sacrifices for the attainment of leisure. We infer from this fact that leisure is valued as a good" - Ludwig von Mises in Human Action

rf80412's picture


The only rational course of action is to work yourself to death.  Death is inevitable, so a man might as well die productively.

Quivering Lip's picture

Its so nice when you can cut and paste a reply from a earlier story. Kinda like a FED dot plot for the last and next 5 years.

All numbers have been bullshit revised or seasonally adjust since the early 80's. When you can go back years, even decades to adjust GDP, employment and inflation its all make believe in the present.

SURVEYS getting revised is my personal favorite!! How the fuck does a survey get revised. 


Ricki13th's picture

Govt data is bullshit I guarantee more record highs are coming. This stuff is so bullish

Xredsx's picture

I really can't wait until the new system comes into play. A world where every single person who works can afford to buy a family home and can buy all their family wants and needs and still can afford to save for old age.  A world full of tourism and no sort of government benefit ..  Sounds better then a global war doesn't it? 

rf80412's picture

I believe that's called socialism.

That doesn't make it socialism, but that's definitely what it's called.

twh99's picture

They have been off a lot longer than just a few years.

onasip123's picture

We had a man-boy, empty suit for President for 8 years who had training wheels on for his entire Presidency and finally it takes a grown up to face the reality of the fake statistics regarding employment and inflation.

dirty fingernails's picture

Who is this guy you speak of and when does he take office?

onasip123's picture

We had a man-boy, empty suit for President for 8 years who had training wheels on for his entire Presidency and finally it takes a grown up to face the reality of the fake statistics regarding employment and inflation.

HoyeruNew's picture

and before that we had a total idiot for president who couldn't even pronounce simple words and was a doll front for Cheney who allowed the biggest terrorist attack to occur on US land.

mo mule's picture

Did you see it?  WW3 started Saturday May 13.  Comes in like a lamb and goes out like a lion?   NK shot that new missle off, and the US knows now that they can't stop this new one. Then they, NK, also set off the ramsonware.

If it is determined that North Korea had a hand in the release of this cyberAttack, then it may very well be deemed a Casus Belli (cause for war).

n fact, that determination may have already been made and these troops may be on the move because an act of war has already been perpetrated by North Korea, and a military response is being put in motion.

Big Fat Bastard's picture

You foolish degenerate gamblers and debt donkeys.

Aubiekong's picture

Well we cant print the real inflation numbers because all the seniors would demand cost of living raises on their SS and that would bankrupt us...

decentralisedscrutinizer's picture


Almost all the world’s economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their military force resides. The only way to regain our sovereignty as a constitutional republic is to severely curtail the privileges of any corporation doing business here. As a free nation, we really have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't take the incorporation of private transnational banks for granted anymore. The government must be held responsible only to the electorate, not fictitious entities, if we are ever to restore sanity, much less prosperity, to the world.




It was a loophole in our Constitution that allowed corporate charters to be so easily obtained it created a swamp of corruption around our capital. It is a swamp that can't be drained at this point because the Constitution  doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 Convention for which the electorate will need consensus beforehand. Seriously; an Article 5 Constitutional Convention could solve that problem in days. This is what I think it will take to save the world; and nobody gets hurt:




28th Amendment


Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:


1, prohibitions against any corporation;


a, owning another corporation,


b, becoming economically indispensable or monopolistic, or


c, otherwise distorting the general economy;


2, prohibitions against any form of interference in the affairs of;


a, government,


b, education, or


c, news media, and


3, provisions for;


a, the auditing of standardized, current, and transparent account books, and


b, the establishment of a state and municipal-owned banking system


c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.




The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual States, smaller sovereign nations, and eventually to buy out the Federal government itself. Now that these fictitious entities own the USA and command its military infrastructure, by virtue of the Federal Reserve Corporation, and run it by virtue of regulatory capture, MSM propaganda, and Congressional lobbying they’ve set their sights on the creation of an all-inclusive global financial empire. The US Constitution is the “Kingpin” of the whole global Machine.


Big Fat Bastard's picture

All that babble can be summarized this way;


Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.

lucyvp's picture

NSS again,  

Health care 15%?? of the economy and 8% of CPI basket?? Of course housing has to be fudged with rent equivalent ..., food and energy not included because they are too volatile.   Mornons never heard of a rolling average ...  Education going through the roof, either college costs or the public school's bigger and biger bite from state budgets and property taxes.   The only item of neccessities that has defalated over the last decades is clothing, but ... I think the quality has been compromised.  Stuff just doesn't wear like it used to.



Attitude_Check's picture

Suuuuuure.... Inflation calculation is too high.   Pull my other finger.   Hedonic adjustment.  


Class dismissed.

Give Me Some Truth's picture

Huh? So GDP is under-stated and inflation is under-reported? Stop. Reverse that. 


Whatever the government says believe the opposite.

The Old Man's picture

Another title to a story that doesn't need to be read. I can see it all around me. Now send me a big fat check for all the effort you knuckleheads!


The Old Man

wide angle tree's picture

if you want numbers, make your own


Don in Odessa's picture

For us ordinary everday people who live in the real world, tally up your unavoidable expenses every month. See how much they rise or decrecrease. Send results to the stupid BLS.

wide angle tree's picture

if you want numbers, make your own