The Dwindling US Economy
Paul Craig Roberts
The announcement today (April 29) of a barely positive GDP first
quarter 2015 growth rate of 0.2 percent (two-tenths of one percent) is
an intentional exaggeration.
Today’s GDP report is the “advance estimate.” There will be two revisions, with the first occurring in one month on May 29.
Although the “consensus estimate,” which is Wall Street’s estimate,
declined dramatically over the past month, the consensus estimate was
for 1.0 percent.
The BEA’s advance estimate bears the burden of impact on financial
markets even though it is the least reliable estimate. Subsequent
revisions receive much less attention. Because of its market impact, the
advance estimate is fudged by the Bureau of Economic Affairs (BEA) in
order not to upset financial markets keyed to the consensus forecast.
All indications are that the first quarter experienced negative GDP
growth, that is, a decline from the previous quarter. However, if BEA
reported a negative GDP when the financial markets were relying on
positive real growth, the government’s Plunge Protection Team might be
unable to prevent a substantial market decline.
Therefore, the BEA in its advance estimate reported a barely positive
result that kept GDP out of negative territory. This gives financial
markets a month to undergo an orderly reduction prior to the first and
then second revisions of the advance estimate, or simply to forget the
poor performance altogether until the second quarter advance estimate.
