Followed by Jim’s message yesterday, reflections on measurement error and perspectives. Note that GDP surprised on the downside, at 1.6 ppt q/q AR against a consensus of 2.5 ppts. On the other hand, GDP+ is growing more quickly, as are final sales to domestic private buyers.
Figure 1: GDP (bold black), GDPNow as of 4/24 (light blue square), GDPNow as of 4/26 (blue square), New York Fed nowcast as of 4/26 (red inverted triangle), survey average April WSJ (light green), CBO estimate of potential GDP (gray), all in billions of Ch.2017$ SAAR. Source: BEA (first quarter 2024 advance), Atlanta Fed, New York Fed, CBO Budget and Economic Outlook (February 2024) and author’s calculations.
If 1.6 ppt seems much lower than 2.5 ppts (q/q AR), remember that this advance estimate will be revised, perhaps substantially. As shown in this Note from the BEA from October 2023 (for the sampling period 1996-2022):
Source: BEA (2023).
What about alternative measures of economic activity? Below I plot reported GDP (expenditure side), GNI (the average of GNI and GDP) and GDP+, and in a separate chart the final sales to domestic private buyers, which are often interpreted as a better measure of overall demand.
Figure 2: Top panel: GDP (bold black), GDO (beige), GDP+ indexed to Q4 2019 GDP level (light blue). Bottom panel: Final sales to domestic private buyers (bold black). All in billions of Ch.2017$ SAAR. The RIB is estimated on the basis of annual growth of 2.2% in the net operating surplus component. Source: advance publication of BEA 2024Q1, Philadelphia Fedand the author’s calculations.
Based on the RA aq/q, the estimated GDO does not increase at all. The missing component of GDI I was filled by 2.2% growth in net operating surplus, using forecast growth of 2.2% in corporate profits for the first quarter. This means that the real net operating surplus should resume its decline in the first quarter.
Figure 3: Net operating surplus in $Bn SAAR (blue, left scale), and in $Ch.2017 Bn, SAAR (tan, right scale). Deflated using the GDP deflator. Source: BEA and author’s calculations.
While GDO and GDP+ have decelerated (the former to 0 ppt), final sales continue at a sustained pace (3% q/q AR), suggesting continued momentum in overall demand.
