Today, the Bureau of Economic Analysis (BEA) released their third "estimate" of the Q2 2010 GDP report showing that the economy continued to weakly expand with real GDP increasing at an annualized rate of just 1.7% from Q1 2010.On a year-over-year basis real GDP increased 3.00% while the quarter-to-quarter non-annualized percent change was 0.43%.
It's important to recognize a fairly significant shift in release terminology that the BEA has taken in the last few quarters when interpreting today's results.
For years, the BEA released three installments of their GDP report, the "advance", the "preliminary" and the "final" for each quarter with the assumption (on the part of the reader) that by the publication of the "final" most metrics captured in the report were fairly firm.
Stating with Q2 2009 though, the BEA began to term the three revisions "estimates" labeling each release "first", "second" and "third estimate".
While this may seem like a minor issue, it's important to recognize that this switch provides a pretext for publishing estimated figures that have little basis in reality.
Case in point, as I pointed out last October, the BEA seriously overestimated the rebound in fixed residential investment first "estimating" that Q3 2009 came in at +23.4%, a faster rate than any quarter in recent history including the entirety of the housing bubble.
This "estimate" was more than suspicious, it was just flatly wrong and now, after multiple revisions, reflects a much more tepid 10.6% rate.... and even that "estimate" might be nothing but a farce.
And yet now, for Q2 2010 the BEA is again estimating that fixed residential investment expanded at a rate of 25.7%!!
With "estimates" like these, it's safe to say that the BEA is having serious trouble with accuracy... possibly as a result of the severity our current decline... possibly for political reasons.
In any event, these GDP report should be viewed with a high degree of skepticism.
