2015 Economic Growth Was Slighty Better Than We Thought
Friday, July 29, 2016
By Jeffery Sparshott / The Wall Street Journal
July 29, 2016 8:30 am EST
The U.S. economy in 2015 turned in its best performance since before the recession, according to newly revised data, though the overarching trajectory of growth remains muted. Gross domestic product, a broad measure of economic output, expanded at a 2.6% pace last year, the Bureau of Economic Analysis said Friday. That’s a small bump up from the most recently reported 2.4% rate and the best since 2006, when the economy advanced at a 2.7% pace.
The agency fine-tunes its GDP estimates multiple times, including the latest annual update covering 2013 through 2015, as newly available and revised source data become available. The latest accounting includes, for example, tabulations from corporate tax returns, the latest federal budget figures and new information on housing.
Even with the small bump to last year’s number, economic growth averages out to only 2.2% from 2010 to 2015, barely moved from the previous 2.1% estimate and a disappointing pace following a particularly severe recession. From 1946 to 2000, GDP growth averaged 3.3%.
Perhaps more interesting than the annual revisions—at least to economy nerds—are changes government economists made to the seasonal
adjustment process. BEA adjusts for predictable seasonal variations—construction slows in the winter, retail sales climb before
December holidays, school starts around the same time every fall and ends about the same time every spring—to give a better sense of underlying economic activity.
But for years, first-quarter GDP has consistently been weak, a phenomenon that initially raised alarms about the economy and then questions about the data.
Agency officials, aware of the shortcomings, made some adjustments last year and reviewed the components that make up GDP to figure out where numbers might be skewing. The latest series of tweaks suggest a smoother pattern of growth from quarter to quarter, though a slowdown in early 2014, perhaps a result of a brutal cold snap, doesn’t allow for a broad conclusion.
To answer two frequent questions: 1.) Yes, seasonal adjustments account for winter. But they don’t account for extreme weather events, such as long stretches of record cold and unusually heavy snow. 2.) No, this isn’t a way to make the economy look better. If new seasonal adjustments add to first-quarter GDP, they necessarily subtract from another quarter or quarters, leaving overall growth the same.
A more complete picture might not come until 2018, when BEA officials plan to revise their historical time series to remove any remaining residual seasonality and also to release estimates of GDP and its major components that are not seasonally adjusted.