we had a really weird revision to GDP this week, maybe a few of your resident wonks like Spencer might be interested…
the reason GDP was revised lower was that the overall GDP deflator was revised higher, from 1.9% to 2.2%, thus reducing real GDP from the nominal amounts by a greater amount…that happened as the PCE deflator, which should be most heavily weighted, was revised down from 2.6% to 2.5%, the gross investment deflator was revised down from 2.9% to 2.8%, the exports deflator was unchanged, the imports deflator was revised down from 9.0% to 7.2%, while the government deflator was revised up from 3.2% to 3.4%…
so why was the GDP deflator revised higher when most of its components were revised lower? the large upward revision to GDP prices reflects the big downward revision to import prices, notably petroleum, based on newly updated International Transactions data…since oil prices were revised lower, that means we imported more of it…and since imports are a subtraction from GDP, any change in their price has an opposite effect on the GDP deflator…thus it was the large downward revision in the price of imported oil which cause the overall GDP inflation adjustment to rise, and hence cause reported GDP to fall, despite the slight upward revision to current dollar GDP…
sources for the above comment:
“Table 4. Price Indexes for Gross Domestic Product: Percent Change From Preceding Period”
for both the 2nd and 3rd estimates of the 1st quarter:
we had a really weird revision to GDP this week, maybe a few of your resident wonks like Spencer might be interested…
the reason GDP was revised lower was that the overall GDP deflator was revised higher, from 1.9% to 2.2%, thus reducing real GDP from the nominal amounts by a greater amount…that happened as the PCE deflator, which should be most heavily weighted, was revised down from 2.6% to 2.5%, the gross investment deflator was revised down from 2.9% to 2.8%, the exports deflator was unchanged, the imports deflator was revised down from 9.0% to 7.2%, while the government deflator was revised up from 3.2% to 3.4%…
so why was the GDP deflator revised higher when most of its components were revised lower? the large upward revision to GDP prices reflects the big downward revision to import prices, notably petroleum, based on newly updated International Transactions data…since oil prices were revised lower, that means we imported more of it…and since imports are a subtraction from GDP, any change in their price has an opposite effect on the GDP deflator…thus it was the large downward revision in the price of imported oil which cause the overall GDP inflation adjustment to rise, and hence cause reported GDP to fall, despite the slight upward revision to current dollar GDP…
sources for the above comment:
“Table 4. Price Indexes for Gross Domestic Product: Percent Change From Preceding Period”
for both the 2nd and 3rd estimates of the 1st quarter:
https://www.bea.gov/newsreleases/national/gdp/2018/pdf/gdp1q18_2nd.pdf
https://www.bea.gov/newsreleases/national/gdp/2018/pdf/gdp1q18_3rd.pdf