It's official: after seeing it work so well for years in China, the US Department of Commerce's Bureau of Economic Statistics has officially replaced all of its excel models with just one function. The following:
[7]
As Steve Liemsan hinted a few days ago, in what we thought was a very belated April fools joke, th eBEA has finally thrown in the towel on weak seasonally-adjusted US GDP data, and as a result has decided to officially proceed with a second seasonal adjustment: one which will take all the bad data, and replaced it with nice and sparkly, if totally fake and goalseeked, GDP numbers.
As Bloomberg reports [8], "the way some parts of U.S. gross domestic product are calculated are about to change in the wake of the debate over persistently depressed first-quarter growth. In a blog post published Friday, the Bureau of Economic Analysis listed a series of alterations it will make in seasonally adjusting data used to calculate economic growth. The changes will be implemented with the release of the initial second-quarter GDP estimate on July 30, the BEA said."
In other words, as of July 30, the Q1 GDP which will have seen its final print at -1% or worse, will be revised to roughly +1.8%, just to give the Fed the "credibility" to proceed with a September rate hike which means we can now safely assume not even the Fed will launch a "hiking cycle" at a time when the first half GDP will print negative (assuming the Atlanta Fed's 0.7% Q2 GDP estimate is even modestly accurate).
Will abnormally "good" data be revised lower, or whether labor market data, which is already manipulated beyond comparison by the BLS will also be adjusted due to "residual seasonality"? Don't hold your breath.
And since economists pride themselves in giving complex names to what even 5 years olds now grasp is open data manipulation, the technical term the BEA will use to goalseek historical data is now also clear: "residual seasonality"
Although the agency adjusts its figures for seasonal variations, growth in any given first quarter still tends to be weaker than in the remaining three, economists have found, a sign there may be some bias in the data. It’s a phenomenon economists call “residual seasonality.”
More details on how economics has just devolved into a complete farce on a scale that even the Chinese Department of Truth will find laughable:
“BEA is aware of the potential for residual seasonality in GDP and its components, and the agency is looking for ways to minimize this phenomenon,” the division said in the post. More information will be available in a BEA Survey of Current Business report scheduled for mid-June publication.
The agency is exploring ways to address possible issues in measures of federal government defense spending, where research has shown that first- and fourth-quarter growth rates are lower on average, the BEA said, reiterating a statement given to Bloomberg published May 18.
It will also start seasonally adjusting some inventory components that currently aren’t, and also some data from the U.S. Census Bureau’s quarterly services survey, it said. The latter should boost the accuracy of consumer spending estimates, it said. The changes to the calculations will cover the period from 2012 to the present.
Additionally, the BEA is reviewing all series that figure into the GDP calculations to find and fix any leftover biases that exist within its current methodology.
And to complete the total collapse of US reporting integrity, here is the full BEA blog post [9]on the topic of goalseeked data, aka "residual seasonality."
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BEA Works to Mitigate Potential Sources of Residual Seasonality in GDP
The Bureau of Economic Analysis (BEA) is working on a multi-pronged action plan to improve its estimates of gross domestic product (GDP) by identifying and mitigating potential sources of “residual” seasonality [10]. That’s when seasonal patterns remain in data even after they are adjusted for seasonal variations.
Each spring, BEA conducts an extensive review–receiving updated seasonally adjusted data from the agencies that supply us with data used in our calculation of GDP. Most of the data the feeds into GDP is seasonally adjusted by the source agency, not BEA. At the same time, BEA examines its own seasonal factors for those series that BEA seasonally adjusts itself. All that work takes place in preparation for BEA’s annual revision to GDP and its major components, which will be released on July 30.
As a result of this ongoing work, BEA is aware of the potential for residual seasonality in GDP and its components, and the agency is looking for ways to minimize this phenomenon.
• One of the areas we’re currently reviewing is possible residual seasonality in measures of federal government defense services spending. Initial research suggests that the first and fourth quarter growth rates are lower on average than those of the third and second quarters. BEA is developing methods for addressing what it has found.
• Time frame to implement: Improvement will take place with the release of second quarter GDP on July 30. Period covered: 2012, 2013, 2014, and forward.
• BEA also will begin adjusting certain inventory investment series that currently aren’t seasonally adjusted.
• Time frame to implement: Improvement will take place with the release of second-quarter GDP on July 30. Period covered: 2012, 2013, 2014, and forward.
• Also as part of this year’s seasonal adjustment review, BEA is planning to seasonally adjust a number of series from the Census Bureau’s quarterly services survey that now have sufficient time spans to which seasonal adjustment techniques can be applied. Currently, these series are smoothed using a four-quarter moving average to attempt to smooth out seasonal trends in the data. While BEA’s review had not identified residual seasonality in the PCE services estimates, applying statistical seasonal adjustment techniques to these indicators will improve the accuracy of the underlying trends in PCE estimates.
• Time frame to implement: Improvement will take place with the release of second quarter GDP on July 30. Period covered 2012, 2013, 2014, and forward.
• BEA will review all series entering the GDP calculations to identify, and where feasible, mitigate any residual seasonality within its existing seasonal adjustment methodologies.
• Time frame to implement: Review will take place with the release of second-quarter GDP on July 30. Period covered: 2012, 2013, 2014, and forward.
• Longer term–beyond July 30–BEA will continue looking at components of GDP to determine if there are opportunities to improve seasonal adjustment methodologies. Should BEA identify other areas of potential residual seasonality, BEA will develop methods to address these findings. If research suggests that residual seasonality originates with already seasonally adjusted source data, BEA will work alongside its source data agencies to determine the appropriate course of action.
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Some further thoughts: when, not if, the Fed's rate hike leads to a recession, that too will be seasonally adjusted away. And QE4 will be called tightening in the name of "residual seasonality."
And, of course, once the Fed's credibility finally crashes, its seasonally adjusted credibility will be at an all time high.
