How Accurate is U.S. GDP?
Latest economic report issued by Northwood University analyzes this ongoing debate
MIDLAND, Mich., June 24, 2015 /PRNewswire/ -- The accuracy of U.S. gross domestic product (GDP) figures has come under scrutiny of late in economic circles, not only in Washington but also nationwide. It's not the annual GDP numbers that economists have begun to debate, says Michigan economist Timothy G. Nash; it's the quarterly numbers.
"The debate seems to focus on whether or not the method used to reasonably adjust U.S. GDP understates first quarter U.S. GDP and then subsequently overstates second through fourth quarter U.S. GDP," says Nash, senior vice president of Corporate and Strategic Alliances at Northwood University in Midland, Michigan. Nash offers his take on this debate in the latest edition of the Northwood University Monthly Economic Outlook, available at the university's virtual Free Market Library.
As Nash, the report's author, notes, the U.S. Bureau of Economic Analysis (BEA) currently adjusts U.S. GDP for such "seasonal factors" as weather or a natural disaster to provide a more accurate overall annual view of the economy to avoid falsely signaling a downturn or recession when it is not on the horizon.
According to the report, many economists are suggesting "doubling" current seasonal adjustments, which causes first quarter U.S. GDP to be generally higher and second, third and fourth quarter GDP to be lower. Some believe the BEA would, therefore, report a "smoother," more accurate view of the economy on a quarterly basis changing nothing regarding annual or overall GDP.
"In my opinion, GDP should not be reported with any type of seasonal adjustment," Nash explains. "This would allow people to better understand that weather or a labor dispute that disrupts exports can have a direct and immediate impact on the U.S. economy and then quickly realize its lasting effect on the next quarter or how a dynamic economy is able to adjust and recover in the following quarter."
The latest issue of the Northwood University Monthly Economic Outlook also examines the latest economic statistics and positive and negative signs affecting the U.S. economy in May, comparing these factors against previous months and years.
For a more in-depth look at Nash's view on the debate over GDP accuracy and his examination of the latest economic indicators, including job growth and labor statistics, download the Northwood University Economic Outlook June 2015.
For more information on Northwood University, visit www.northwood.edu, or call 800.622.9000.
ABOUT NORTHWOOD UNIVERSITY
Northwood University is committed to the most personal attention to prepare students for success in their careers and in their communities; it promotes critical thinking skills, personal effectiveness, and the importance of ethics, individual freedom and responsibility.
Private, nonprofit, and accredited, Northwood University specializes in managerial and entrepreneurial education at a full-service, residential campus located in mid-Michigan. Adult Degree Programs are available in seven states with many course delivery options including online. The DeVos Graduate School offers day, evening, and weekend programming in Michigan and Texas. The Michigan-based Alden B. Dow Center for Creativity and Enterprise provides system-wide expertise in family enterprise, entrepreneurship, creativity and innovation, and new business development. International education is offered through study abroad and in Program Centers in Switzerland, China (Changchun and Wuxi), Malaysia and Sri Lanka.
For additional information regarding Northwood University, go to www.northwood.edu.
SOURCE Northwood University
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