GDP, deflator versus CPI : in the US too they have “statistical glitches”

Following my article on GDP Q2 (read here), you might remember my chart about the deflator/CPI.

I wrote that the 3,7 % on Q1 were a statistical glitch. I remind you the rule : the lower the deflator is, the higher the real GDP (constant prices) is.

When we say that the growth of GDP on Q2 was 5,3 %, its compared to Q2 2007. And it’s for real GDP.

Now, as you may know the USA published thursday a “revised” GDP for Q2. With surprising numbers indeed.

Here is a chart… about the US deflator… You can note exactly the same “statistical glitch” than for Thailand. But longer. 😉

I invite you to read the very good article from Mike Shedlock GDP Much Weaker Than Headline Numbers who seriously debunkes the US “surprising” figures.

It’s a must read if you want to understand what lays behind GDP datas, and if you want to avoid to be taken for a turkey… The strong growth in Q2 in the US is an illusion. The name of the game will be different on Q3 and Q4, exactly like in Thailand (and probably the entire world).

One article summarizes what is coming in the US : Consumer Spending in U.S. Slowed in July as Prices Rose Most in 17 Years (Bloomberg).

July… first month of Q3. After the party… 😉

3 Responses to “GDP, deflator versus CPI : in the US too they have “statistical glitches””

  1. 1 FDL 29 August 2008 at 3:42 pm

    When I stayed with my son two months ago at Philadelphia, the one odd experience that stood out was the non-stop barrage of TV ads and unsolicited phone calls for inviting easy-to-get cash loans for whatever . . . credit cards, home refinance, even loans for poor credit rated folks,etc!

    And I read this article at The Nation HOUSEHOLD DEBTS HITS RECORD becomes relevant because I just realized that perhaps the Thais had already been infected by the American addiction to debts. This is ominous because The Nation article further commented: ” . . .the level of household debts hit a record high of Bt2.46 trillion, up 16.55 per cent year on year. . . Total household debt accounts for 25.97 per cent of the total gross domestic product. Debt per household rose to Bt135,166 this year from Bt116,681 last year. . . found people have borrowed more this year for daily living expenses, transport costs, household expenses, healthcare and investment. . .The figure clearly indicated that people are having serious cash-flow problems mainly due to the fact that these people’s incomes do not cover the rising costs of living,”

    “Inflation will hurt everyone but the poor segment will be hurt the most.” – Ain’t that a fact?

  2. 2 ThaiCrisis 7 September 2008 at 3:51 pm

    Read this about deflator and GDP growth in the US.

    In its report, the Commerce Department stunned economy watchers by showing a 3.3% annualized increase in 2nd Quarter GDP.

    The robust growth apparently wrong-footed those expecting further recessionary signals, lent further strength to the current dollar rally, and encouraged previously cautious investors to take another look at U.S. stocks.

    The strong number also bolstered claims by the Bush administration and the McCain campaign that a recession is primarily a psychological phenomenon. These conclusions would be at least quasi-logical if they were not based on a complete misreading of the report.

    Without raising an eyebrow on Wall Street or in the press, the GDP deflator, used in the report to downwardly adjust GDP to account for inflation, was shown at just 1.2% annualized…. the lowest deflator in ten years.

    In other words, to arrive at a 3.3% growth rate, the government assumed that inflation is running at a ten-year low!

    In contrast, the latest reading on consumer prices (CPI) in the second quarter shows year-on-year inflation running at a 5.6% rate, a seventeen-year high! In fact, for the second quarter, the same time period measured by the GDP deflator, prices actually rose at an even faster pace of 8.0% annualized.

    How can it be that inflation is simultaneously running at a seventeen-year high and a ten-year low? Welcome to the Alice in Wonderland world of government statistics.


  1. 1 Thailand : economic grow less than 3.8% next year - - The Thailand Forum Trackback on 23 October 2008 at 6:18 am

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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