How GDP Became A Joke, In One Chart

For all the rhetoric about above-trend US growth, one month ago UBS shattered the narrative of surging GDP by showing just one chart, which revealed that excluding contributions from energy investment, which are about to hit a brick wall now that the price of oil has peaked and is reverting lower once again, US growth for the past 2 years has been slowing.

On the other hand, things get even more complicated thank to a chart released yesterday by UBS' global chief economist Paul Donovan who makes a point we have repeatedly underscored over the past decade, namely that economic data is largely worthless, and any instant snapshot reveals more about the political and "goalseeking" climate of the agency releasing the "data" than about the underlying economy itself.

As Donovan shows, here are the no less than 6 answers one gets to the question of "how fast was the US growing at the start of 2015?."

By way of context, recall that this was the quarter when the US was blanketed by deep snow, and when every "expert" was rushing to convince those who bothered to listen that the economy would suffer a sharp slowdown as a result of the weather and nothing but the weather (and yes, that included UBS). And when the number was first reported, that was indeed the case: with Q1 2015 GDP reportedly growing only 0.2%. The problem is that within just over a year, that 0.2% initial GDP print turned to -0.7%, before subsequently surging to 2% and ultimately 3.2%!

Here is the sarcastic take of UBS' own chief economist on this GDP travesty, which is even more sarcastic  - and ironic - considering his entire job is to predict the exact number associated with said travesty:

Economic data is not very precise. Economists are trying to hit a target that is moving rapidly. Economic data is being revised more often, and the revisions are larger than in the past. The following chart shows annualized US GDP growth in the first quarter of 2015.

 

Growth was initially reported very weak, below consensus and barely moving. Then the data was revised to show the US economy was shrinking – and shrinking a lot (the number was –0.7% annualized). Then it was revised to show the economy was shrinking a bit. Then it was revised to show the economy was growing, but a long way below trend growth.

 

The growth number was then revised to be basically in line with trend growth. Now, US growth at the start of 2015 is thought to be 3.2%.

 

So which number in the range of –0.7% to 3.2% is the economist supposed to be forecasting? An economist predicting 3.2% growth when the data was first released would have been ridiculed. According to the latest information we have, that economist would have been right.

In other words, that terrible weather which at the time was used to justify why the economy ground to a halt - when in reality it was all a function of China's credit impulse crashing - would eventually serve as a the catalyst to grow the economy at a pace that has been recorded on just a handful of occasions in the past decade.

No wonder then economists - especially those who work at the Fed but all of them really - their predictions and their analyses have become the butt of all jokes; and by implication, no wonder traders and algos no longer respond to economic "data."

Comments

knukles Arnold Wed, 12/13/2017 - 12:03 Permalink

They lost me long ago.    What's precious about this is that everyday I need a reminder of just how bad it really is.  This is like a nightmare that chases you around the bedroom when you awake..

In reply to by Arnold

spastic_colon knukles Wed, 12/13/2017 - 12:06 Permalink

i dont think anyone should be surprised about the yellen farewell tour.............wouldnt it be fitting if the bankers (joos) gave trump a nice big fat christian sendoff (correction) in the stock market just for good measure.....what if yellen did not raise today and leaves it to the new guy to take all the blame? so many possibilities.

In reply to by knukles

Muddy1 knukles Wed, 12/13/2017 - 12:08 Permalink

OBAMA, his legacy, we can't have it said he was the first American president who NEVER had a quarter without 3% growth in GDP. So they just revise the figgers (rhymes nicely doesn't it?) and revise history while they're at it.  Gotta protect 'dat legacy.I can't wait to see how they revise the numbers to trash Trump's legacy.

In reply to by knukles

Blue Dog ThanksIwillHav… Wed, 12/13/2017 - 12:36 Permalink

Actually, there are a number of good ways to measure economic activity:Big businesses have to file sales tax receipts at least monthly. Some cases even more often.Income tax withholding on quarterly 941 filings.Electricity usage.But the numbers are all fake. John Williams at shadowstats.com has talked about it. There are what are called quality of life adjustments to GDP. They've included things like going from monochrome printers to color printers, computer advancements, cell phone advancements, and so on. Plus, my favorite, the rental value of your home even though you live in it and don't rent it out. They also assume that you keep fixing it up for yourself so that value is continually increasing. 

In reply to by ThanksIwillHav…

Atomizer Wed, 12/13/2017 - 12:12 Permalink

Sophia and the Future of AI - YouTubeHUMANOID SOPHIA SPEAKS ON HER FEELINGS ABOUT GOD AND ...Look to right side, gray fleece hiding something. I can plainly see the power stick. This guy has no clue. If he brings in open source, the bitch will get fried. Garbage in, garbage out. Agree with the poster. It's all a scripted interview. Someone at computer is pressing the return button after question is asked. If you watched other videos, they have her hooked up to a WiFi connection. This one, hard wired.  

GreatUncle Atomizer Wed, 12/13/2017 - 12:22 Permalink

Fake religions to believe in.Fake kings and queens to beleive in.Fake governance such as voting rights to believe in.UP NEXT THE FAKE AI ROBOT TO BELIEVE IN.The whole concept of allowing those who pretend to be better than you to rule when they are no more than kiddly fiddlers, thieve and warmongers.The robot might not be such a bad choice provided he does not figure it out "that exterminating the human species might be a sensible concept for a robot". 

In reply to by Atomizer

CRM114 Wed, 12/13/2017 - 12:22 Permalink

The only reliable gauge, as it was in 2007/8, is actually anecdotal data, gained from being observant when purchasing and finding out what Joe Average is actually doing.Who's buying autos?How are they paying for it?Are your friends putting off big purchases?Have idiots you know of still been given big loans/credit?Is anyone buying non-sale goods?What do acquaintances think of their job security?Etc.A ground-level sales crash is still 6 months off at least from my observations, and I did get 2008 exactly right.Anyone anything to add? Of course, the crash could come from some high finance cause also, but there's no real data available. The rush for bomb-proof estates in New Zealand seems to be over, so I don't think there are any deliberate crashes planned by TPTB just yet. 

Consuelo CRM114 Wed, 12/13/2017 - 13:48 Permalink

 Sure, happy to: Here in the Bay Area, one could easily be forgiven if he thought he resided in a parallel universe, as growth (construction/expansion/build-out, etc.) has never before been witnessed on a scale that it has here since about 2012.   All driven by the social media phenomenon ($ad-revenue) and the downstream support apparatus it feeds.What has been going on here since 2012 in terms of real or perceived 'good times' makes the run-up to the housing bubble/collapse look like the 'JV team'...Restaurants, bars, eateries of all sorts, retail, automobiles, smart-phones, etc., are off the charts.   And that is right from a ground-zero, anecdotal observers opinion as you state. I don't know what the catalyst may be which finally sets the crack-up-boom in motion here, but when it does - look out. 

In reply to by CRM114

CRM114 Consuelo Wed, 12/13/2017 - 16:00 Permalink

Many thanks;so are people spending all that based on real earnings, or credit?In other words, it is all OK unless the ad revenue dries up?I am seeing record construction, all aimed at the top of the market, and desperate competitions to buy at the cheaper end, nothing in the middle is moving. 

In reply to by Consuelo

VWAndy Wed, 12/13/2017 - 12:23 Permalink

 Getting correct numbers out of these banks or this government just dont happen. They will do whats in their best intrest every time.  They have been unaccountable to the people for over 100 years now. Just write this down. They are always lying about everything.

gookempucky Wed, 12/13/2017 - 12:34 Permalink

Again we are "told" how goood it is ---really ---year 2000 work force was 135 million-GDP was 10 trillionfast forward 2017 work force is 154 million--GDP is 19 trillion--so 20 million people added to the workforce generated9 trillion in GDP---this HOLE charade should be called ADP "additional debt product" period. Guess I have to start leaving pennies in the parking lot- let lay- as that is no doubt part of the GDP equation. What a farce.

Goldbugger Wed, 12/13/2017 - 12:50 Permalink

LIES all fucking LIES, BLS Lies, FBI Lies, CIA Lies, Head of NSA Lies, Banks, ECB, IMF, FUCKING BUNCH of LIES. They say them so much they believe their own lies.

venturen Wed, 12/13/2017 - 12:53 Permalink

without the fracking boom....Obama recovery would never have worked. I would rather be lucky than good....Obama did almost eveything in his power to stop fracking....and that is WHAT SAVED THE ECONOMY

rejected Wed, 12/13/2017 - 12:58 Permalink

Everything the gov puts out is a joke. GDP mainly because they're under reporting the ever changing components of CPI.Secondly because they're counting the forced Obamacare Premium TAX.Thirdly they count the parasites that collect government checks. (laughingly called government workers)....... no such thing!  Fourthly because they count the welfare, EBT and other free shit tax dollars spent and counted by the recipient welfare businesses as profits.