August 10, 2001

GDP Revised Downward

Q: The government recently revised productivity data for the year 2000. Does that make a change in the GDP for 2000?

A: The Labor Department revised productivity growth downward to 3% from 4.3% in 2000. This was done as a result of the Bureau of Economic Analysis' multi-year revisions to the GDP. The BEA lowered its GDP estimate to 4.1% from 5.0% in 2000, indicating that the economy last year wasn't as strong as once thought.

More importantly, the economy is definitely weaker this year. In fact, just today a group of economists slashed their GDP forecasts for the second half of the year (see related article: The economists, on average, lowered their third-quarter growth estimates to 1.7% from the 2% they predicted just last month. In the fourth quarter, the group sees growth of 2.8% -- down from the 3% they called for in July.

We won't be surprised to see them revise these predictions even lower in the months ahead. After all, several of the economistsexpect the government to lower already-issued? second quarter GDP figures(?). Many believe that the second quarter GDP will be revised to zero or just above, while still others expect that government revisions will show the economy actually contracted last quarter.

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