Transcript Macroeconomic Data in Real Time

Macroeconomic Data
in Real Time
Tara M. Sinclair
George Washington University
Weidenbaum Center Media Retreat
Wianno Club in Cape Cod
June 28, 2011
Why Do We Care About Macro Data?

Federal Reserve Chairman Ben Bernanke:
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“I think that having good data, good statistics—
and the United States generally has better
macroeconomic statistics than most countries—
and having good economists to interpret those
data and present the policy alternatives, has a
substantially beneficial effect on policymaking in
the United States.”
How Good Are US Macro Data?
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Two key issues:
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We face an “accuracy-timeliness” tradeoff with
almost all macroeconomic data.
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Different measures can give a very different
picture of the economy.
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Data are regularly revised.
Therefore economists look at a lot of data.
One related question:
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What about macroeconomic forecasts?
Example: GDP Revisions
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Real GDP is measured quarterly, with estimates
released monthly:
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“Advance” estimates are released one month after the
quarter.
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“Second” estimates are released two months after the
quarter.
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Recently renamed – had been “preliminary.”
“Third” estimates are released three months after the
quarter.
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Gross Domestic Product, 2nd Quarter 2011, (advance estimate)
will be released July 29th.
Recently renamed – had been “final.”
Annual revisions each July for the previous year, plus
occasional additional “comprehensive” revisions.
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Next annual revision will be released July 29th.
BEA News Release Friday, June 24, 2011
A More Extreme Example
GROSS DOMESTIC PRODUCT: SECOND QUARTER 2008
Advance
Preliminary
Final
(Percent change from preceding quarter)
Real GDP............................................... 1.9
A More Extreme Example
GROSS DOMESTIC PRODUCT: SECOND QUARTER 2008
Advance
Preliminary
Final
(Percent change from preceding quarter)
Real GDP............................................... 1.9
3.3
A More Extreme Example
GROSS DOMESTIC PRODUCT: SECOND QUARTER 2008 (FINAL)
Advance
Preliminary
Final
(Percent change from preceding quarter)
Real GDP............................................... 1.9
3.3
2.8
A More Extreme Example
GROSS DOMESTIC PRODUCT: SECOND QUARTER 2008 (FINAL)
Advance
Preliminary
Final
(Percent change from preceding quarter)
Real GDP............................................... 1.9
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July, 2009 – revised to 1.5
3.3
2.8
A More Extreme Example
GROSS DOMESTIC PRODUCT: SECOND QUARTER 2008 (FINAL)
Advance
Preliminary
Final
(Percent change from preceding quarter)
Real GDP............................................... 1.9
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July, 2009 – revised to 1.5
July, 2010 – revised to 0.6
3.3
2.8
2001 Recession Example
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8
6
4
2
0
-2
00Q1
00Q2
00Q3
00Q4
01Q1
01Q2
APRIL_2002
01Q3
01Q4
02Q1
2001 Recession Example
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8
6
4
2
0
-2
00Q1
00Q2
00Q3
00Q4
01Q1
APRIL_2002
01Q2
01Q3
JULY_2002
01Q4
02Q1
2001 Recession Example
10
8
6
4
2
0
-2
00Q1
00Q2
00Q3
00Q4
01Q1
JULY_2002
01Q2
01Q3
JULY_2004
01Q4
02Q1
2001 Recession Example
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6
4
2
0
-2
00Q1
00Q2
00Q3
00Q4
01Q1
JULY_2004
01Q2
01Q3
JULY_2009
01Q4
02Q1
Example: BLS Employment Revision
140,000
138,000
136,000
134,000
132,000
130,000
128,000
2003
2004
2005
2006
2007
2008
2009
2010
Employment according to data in January 2010
Employment according to data in February 2010 (benchmark revision)
How Good Are US Macro Data? - 2
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There is a lot of macro data out there.
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Which inflation measure should we rely on?
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How do we compare annualized growth rates to quarterto-quarter growth rates to…?
What about seasonal adjustment?
Which measure best captures the labor market?
What about cross-country comparisons?
Different Inflation Measures
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Overall/Headline: General rise in the price
level.
Core – excludes food and energy
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Reduces volatility.
May be a better forecast of future inflation than
overall/headline inflation.
CPI versus GDP deflator versus PCE.
BLS CPI Press Release
BEA GDP Price Index Press Release
What’s the difference between 0.2 and 0.3?
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At a compound annual rate:
What’s the difference between 0.2 and 0.3?
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At a compound annual rate:
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May Core CPI: 3.5%
What’s the difference between 0.2 and 0.3?
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At a compound annual rate:
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May Core CPI: 3.5%
April Core CPI: 2.2%
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Comparing Across Measures
(compound annual growth rates)
Comparing Across Measures
Seasonal Adjustment
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Seasonal events affecting the economy
follow a more or less regular pattern each
year, so the statistics are regularly
adjusted to make it easier to observe the
longer term movements in the series.
BLS Press Release
Two Different Unemployment Rates
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The conventional unemployment rate, is
defined as: “Total unemployed persons, as a
percent of the civilian labor force.”
The broadest Bureau of Labor Statistics
(BLS) measure of unemployment, is defined
as: “Total unemployed persons, plus all
‘marginally attached’ workers, plus all
persons employed part time for economic
reasons, as a percent of the civilian labor
force plus all ‘marginally attached’ workers.”
Unemployment Rates
Average(mean) Duration of
Unemployment
Labor Force Participation Rate
Cross-Country Comparisons
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US: 
GDP increased at an annual rate of 1.9
percent in the first quarter of 2011, (that is,
from the fourth quarter to the first quarter).
UK: GDP grew by 0.5 per cent in the latest
quarter. GDP in the first quarter of 2011 is
now 1.8 per cent higher than the first quarter
of 2010.
China: China's GDP grew 9.7 percent on
year in the first quarter of 2011.
Make sure real, not nominal.
Does this mean we’re trapped in an xkcd comic?
No, But…
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When it comes to forecasts, particularly about
recessions, Laurence J. Peter may be right:
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“An economist is an expert who will know
tomorrow why the things he
predicted yesterday didn't happen today.”
Unfortunately:
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“The success of monetary policy depends
importantly on the quality of forecasting.”
—Alan Greenspan (2004)
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Example Forecast
6
4
2
0
-2
-4
-6
-8
2007
2008
REAL_GDP
2009
2010
SPF_1_QTR_AHEAD
2011
Bank of England Inflation Forecast
Fan Chart (‘river of blood’)
Final Takeaways
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Macroeconomic data can send mixed signals
as it arrives in real time.
Macroeconomic forecasts are even less
reliable than the incoming current data.
So…
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don’t be surprised when the data and the
forecasts change.
don’t rely on a single number.
Great Data Sources
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Data: St. Louis Federal Reserve
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Most recently revised data: Federal Reserve
Economic Data (FRED)
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“Vintage” data: ArchivaL Federal Reserve
Economic Data (ALFRED)
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http://research.stlouisfed.org/fred2/
http://alfred.stlouisfed.org/
Forecasts: Philadelphia Federal Reserve
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Survey of Professional Forecasters
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http://www.philadelphiafed.org/research-and-data/realtime-center/survey-of-professional-forecasters/