The Reliability of the GDP and GDI Estimates

Abstract

HE NATIONAL income and product accounts (NIPAs) provide a timely, comprehensive, and re­ liable description of the condition of the U.S. economy. The two featured measures—gross domestic product (GDP) and gross domestic income (GDI)—are equally valid summary measures of economic activity. GDP measures activity as the sum of all final expenditures in the economy plus change in private inventories. It is detailed on the product side of the domestic income and product account. GDI measures the sum of all in­ comes generated in production, and it is detailed on the income side of the domestic income and product account. In principle, GDP and GDI give the same measure of economic activity, but in practice, they dif­ fer because each is estimated with different source data. This study analyzes the reliability of the successive estimates of GDP and GDI and their components for 1983–2006. “Reliability” refers to the magnitudes of the revisions to the successive estimates of these mea­ sures and their major components. 1 The revisions are measured as the changes from an earlier vintage of the estimates to a later vintage, for example, from the ad­ vance estimate to the final estimate (see the box “Vin­ tages and Timing of Revisions”). The latest available estimates are assumed to be the best estimates and are used as the standards for reliability. This study concludes that Bureau of Economic Analysis (BEA) statistics are generally reliable and present useful pictures of the nation’s economic activ­ ity. In particular, the early quarterly estimates provide an accurate picture of the economy, indicating whether economic growth was positive or negative, whether it was accelerating or decelerating, whether it was high or low relative to trend, and where the economy was in relation to the business cycle. 1. This definition of reliability differs from that used in statistics to ana­ lyze survey results and quality control. Reliability is used as a guide to “accuracy” of the total measurement error, which in the NIPAs is never observed. The Bureau of Economic Analysis (BEA) prepares quar- age of the final estimates for each quarter of the previous terly and annual estimates of gross domestic product year; this estimate is prepared and released in March with (GDP) and gross domestic income (GDI). It prepares the final estimate for the fourth quarter of the year. (In three current quarterly vintages of GDP estimates— years with annual revisions, the quarterly estimate of the advance, preliminary, and final estimates. The advance first quarter of the previous year is from the first current estimates for a quarter are released about a month after annual estimate released the previous summer.) The curthe quarter ends. The preliminary estimates for the quar- rent annual estimates for 3 preceding years are revised as ter are released 2 months after the quarter. And the final part of the annual NIPA revision. After the third annual estimates are released 3 months after the quarter. In addi- revision of the estimates for a year is released, these esti­ tion, as part of the annual NIPA revision release in July of mates are not revised or released again until the next each year, the quarterly estimates for the 3 preceding comprehensive benchmark NIPA revision. years are revised. Annual NIPA revisions are superseded by comprehen