Was real GDP growth in the first quarter even less than 2.2%?
The Consumer Metrics Institute has this discussion:
Once again the BEA has used "deflaters" that will strain the credibility of the public, especially if they buy gasoline. To correct the "nominal" data into "real" numbers the BEA assumed that the annualized inflation rate during 1Q-2012 was 1.54%. As a reminder, lower "deflaters" cause the reported "real" growth rates to increase -- and once again very low seasonally adjusted BEA inflation "deflaters" have been the headline number's best friend. If the raw "nominal" numbers were instead "deflated" by using the seasonally corrected CPI-U calculated by the Bureau of Labor Statistics (BLS) for the same time period, nearly the entire headline growth rate vanishes -- and the resulting growth rate would have been a minuscule 0.08% with "real final sales" contracting.
And real per capita disposable income actually shrank during the quarter -- even using the BEA's optimistic "deflaters." Real-world households likely felt the pinch even more. . . .
posted by John Lott at 2:24 AM
1 Comments:
1. The word is "deflator," not "deflater."
2. A deflator is a weighted average of prices of goods and services represented in some quantity. The weights should reflect the composition of what you are measuring. Deflating GDP by the CPI would be like using average height and weight of Vietnamese consumers to choose stock for a US department store. You should deflate GDP by the things that go into GDP, not the things that go into the consumption basket.
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