Wednesday, November 24, 2010

Revising GDP Upward

You may remember a few weeks ago that we reported the American economy grew at 2.0 percent in the third quarter of this year. Yesterday, the Commerce Department announced that the figure was actually 2.5 percent. How could the original number have come in so wrong? There are three basic changes to the figures that were first reported:

* The original estimate of aggregate exports was increased by $5.9 billion.

* Consumer spending turned out to be higher than originally thought, to the tune of an additional $5.7 billion.

* The first GDP estimate showed that spending by state and local governments had dropped by $900 million in the quarter. In reality, their spending was up by $2.9 billion, so that's a $3.8 billion swing.

All told, that's a 25 percent increase in GDP growth over what was first reported. That's a pretty solid improvement.

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