Why Do Old GDP Numbers Change?
Usually, once you’ve measured something the number stays the same… a record for
that point in time. If Little Jimmy is 42 inches tall on a 6th birthday, he may be 6-foot-2 big Jimmy when he
turns 18. But his parents will always know that
Jimmy was 42 inches tall the day he turned 6. Economist use GDP or gross
domestic product to measure the U.S. economy at a given time. But sometimes
they go back later and adjust the numbers. why go back and change old GDP numbers?
In the world of national accounting, it’s the right way to measure. Here’s why.
Business people, policymakers, and many other Americans eagerly watch for the
latest GDP number. Most focus on the GDP rate to see how
fast the economy is growing, or shrinking. The Bureau of Economic Analysis comes
out with an initial GDP estimate about a month after each quarter of the year
ends. People want these numbers fast. Then, a
month later, BEA revisit its official estimate for
that same quarter. Then it updates that same estimate again the next month. The earlier numbers weren’t wrong. But
the later numbers are better, because they are based on more complete
information. Data used to calculate GDP comes from more than 300 sources: surveys
by other agencies, like the Census Bureau; government spending and tax figures;
private data collectors’ info on auto and home sales, and more. Some good
information flows in quickly. But some high-quality, comprehensive data take
months or even years to arrive. As better data comes in, we get a sharper picture of what was
happening in the economy during that time period. The advance estimate is the “first
look” at a quarter, based partly on projections. We’ve been working with the census
bureau to get more of their data faster, to make this first look even better. The
second and third estimates are each built from stronger data. The numbers are refined again in an
annual update each summer. Then there are comprehensive updates, using data from
the U.S. Economic Census, which is conducted every five years. Sometimes we recalculate GDP all the way
back to BEA’s first annual statistics, for the year 1929. That’s done when data collecting methods,
definitions, for statistical standards improve. It’s important to measure GDP the same
way across the years, so you can compare one time period to another.
That helps Americans better understand our economy and its history. So: We get initial GDP estimates out
quickly, because people need them to help make decisions. those first estimates are good job
capturing the big picture of economic growth of business cycles. Then BEA keeps honing the numbers over time,
for the greatest accuracy possible. That’s why, unlike Jimmy on his 6th
birthday, GDP can grow or shrink when economist look back. The changes help keep GDP timely,
accurate and reliable.