Time to Increase the US GDP Numbers

31 Jul

If you follow the S&P 500, you’ll know that the companies that comprise this list are not the same as those in the 1950’s, or 1930’s, or even last year. As time marches forward, often companies that have lower and lower market caps, among other reasons, are replaced with ones that are rising in value. This has a distorting effect on S&P 500 charts over time. From a practical standpoint, you need to keep the list current to accurately reflect what the current market is like. Also it does not make sense to keep some companies on the list that are no longer viable. (an example)

Well, it appears that the way the government measures the US GDP is in for a similar, but not the same, update. Today, July 31, 2013, the changes will be announced.

    For the first time in four years, the Commerce Department will revise its estimates of U.S. gross domestic product — the value of U.S.-made goods and services — back to 1929. 

For the first time, money spent on R&D and on the Arts will be included in the GDP. It appears the international community had already accepted the changes to increase their respective GDP numbers.

    The biggest share of America’s R&D spending goes to develop new drugs

The government says the difference between that final growth estimate updated annually, and the initial GDP estimate released within a month of a quarter’s end, can be as much as 1.3 percentage points in either direction.

It will be interesting to see how the new numbers impact the national GDP, but this is probably done in an attempt to offset the downgrade in the GDP numbers posted last month. The total impact looks likely to be in the $400B range annually. That works out to be about 2.7% of the $15 Trillion GDP number for 2012.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: