By Michael Owyang, Research Officer and Economist
Gross domestic product (GDP) is a quarterly economic indicator that reflects the amount of output produced in a country. In the U.S., the Bureau of Economic Analysis (BEA) releases two estimates of quarterly GDP, known as the advance and preliminary estimates, in the two months before the release of the final number:
In a recent Economic Synopses essay, we examined the pattern of revisions for payroll employment data. We found that the sign of the revision to payroll employment, released by the Bureau of Labor Statistics is more likely to be positive (revised up) during expansions and more likely to be negative (revised down) during recessions. We argued that this created a conundrum for policymakers who rely on the just-in-time release of the economic indicators to enact appropriate policies.
We wondered whether the same asymmetry occurred for the GDP releases—that is, whether there was a systematic difference between the final number and, say, the preliminary release. The figure below shows the difference between the final release and the preliminary release, with recessions shaded in gray.
While there are no obvious patterns, there are typically large negative revisions from the preliminary releases to the final releases at the beginning of recessions.
What accounts for the differences between the preliminary and final estimates of GDP? The differences may lie in the period over which they are measuring or in the methods used for their collection.