2.5% First Quarter 2013 Real Annual Growth in Gross Domestic Product (GDP) — Stagflation — Government GDP Calculation of Investment To Include Intangibles R&D — Videos

Posted on April 26, 2013. Filed under: American History, Blogroll, Business, College, Communications, Economics, Education, Employment, Federal Government, Federal Government Budget, Fiscal Policy, government, government spending, history, History of Economic Thought, Investments, Law, liberty, Life, Links, Literacy, Macroeconomics, media, Microeconomics, People, Philosophy, Politics, Raves, Talk Radio, Tax Policy, Taxes, Technology, Unions, Video, War, Wisdom | Tags: , , , , , , , |

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Ken Langone: Regulation Biggest Issue Hurting U.S. Economy

April 26 (Bloomberg) — Ken Langone, founder & CEO at Invemed Associates, talks with Bloomberg’s Erik Schatzker and Sara Eisen about first-quarter U.S. GDP, the impact of regulations and the anti-business stance of the Obama Administration. He speaks on Bloomberg Television’s “Market Makers.”

Peter Schiff We re in Depression, Dollar Crisis Coming

[

GDP Propaganda Exposed

Data shift to lift US economy 3%

By Robin Harding in Washington

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development.

Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output.

Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times that the update was the biggest since computer software was added to the accounts in 1999.

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.

The changes will affect everything from the measured GDP of different US states to the stability of the inflation measure targeted by the Federal Reserve. They will force economists to revisit policy debates about everything from corporate profits to the causes of economic growth.

The revision, equivalent to adding a country as big as Belgium to the estimated size of the world economy, will make the US one of the first adopters of a new international standard for GDP accounting.

“We’re capitalising research and development and also this category referred to as entertainment, literary and artistic originals, which would be things like motion picture originals, long-lasting television programmes, books and sound recordings,” said Mr Moulton.

At present, R&D counts as a cost of doing business, so the final output of Apple iPads is included in GDP but the research done to create them is not. R&D will now count as an investment, adding a bit more than 2 per cent to the measured size of the economy.

GDP will soar in small states that host a lot of military R&D, but barely change in others, widening measured income gaps across the US. R&D is expected to boost the GDP of New Mexico by 10 per cent and Maryland by 6 per cent while Louisiana will see an increase of just 0.6 per cent.

Creative works are expected to add a further 0.5 per cent to the overall size of the US economy. Around one-third of that will come from movies, one-third from TV programmes, and one-third from books, music and theatre.

Deficits in defined benefit pension schemes will also be included because what companies have promised to pay out will be measured, rather than the cash they pay into plans.

“We will now show a liability for underfunded plans, which particularly has large ramifications for the government sector, where both at the state level and the federal level we have large underfunded plans,” said Mr Moulton.

The changes are in addition to a comprehensive revision of the national accounts that takes place every five years based on an economic census of nearly 4m US businesses.

Steve Landefeld, BEA director, said it was hard to predict the overall outcome given the mixture of new methodology and data updates. “What’s going to happen when you mix it with the new source data from the economic census . . . I don’t know,” he said.

But he said the revisions were unlikely to alter the picture of what has happened to the economy in recent years. “I wouldn’t be looking for large changes in trends or cycles.”

http://www.ft.com/cms/s/0/52d23fa6-aa98-11e2-bc0d-00144feabdc0.html#axzz2Rb5G6QBg

US GDP Will Be Revised Higher By $500 Billion Following Addition Of “Intangibles” To Economy

Submitted by Tyler Durden

Those who have been following the US debt to GDP ratio now that the US officially does not have a debt ceiling indefinitely, may have had the occasional panic attack seeing how this country’s leverage ratio is rapidly approaching that of a Troika case study of a PIIG in complete failure. And at 107% debt/GDP no explanations are necessary. Luckily, the official gatekeepers of America’s economic growth (with decimal point precision), the Bureau of Economic Analysis have a plan on how to make the US economy, which is now growing at an abysmal 1.5% annualized pace, or about 5 times slower than US debt growing at 7.5% annually, catch up: magically make up a number out of thin air, and add it to the total. And it literally is out of thin air: according to the FT the addition will constitute of a one-time addition of intangibles, amounting to 3% of total US GDP, or more than the size of Belgium at $500 billion, to the US economy.

From FT:

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development.

Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output.

Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times that the update was the biggest since computer software was added to the accounts in 1999.

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.

What exactly will constitute GDP growth going forward? In a word, intangibles: films, books, magazines and iTunes songs.

“We’re capitalising research and development and also this category referred to as entertainment, literary and artistic originals, which would be things like motion picture originals, long-lasting television programmes, books and sound recordings,” said Mr Moulton.

At present, R&D counts as a cost of doing business, so the final output of Apple iPads is included in GDP but the research done to create them is not. R&D will now count as an investment, adding a bit more than 2 per cent to the measured size of the economy.

Nothing like adding intangibles in the fluid, ever-changing definition of what constitutes an economy.

Naturally, the only reason for this artificial “boost” to the US economy which apparently can be any old arbitrary number agreed upon by a few accountants, and which always goes up post revision, never down, is to make US debt/GDP under 100% once again, if only very briefly. Surely a few months later something else can be “added” to GDP making the US economy appear better than it is once more.

Finally, all of the above is a distraction for idiots.

As most people should know by know (this logically excludes economists), the only factor leading to economic “growth” is the expansion of liabilities of the financial system, whereby new credit (in a healthy environment, not one centrally-planned by several Princeton real-world rejects, where the central bank is forced to create all credit expansion with money that never leaves the banks and the capital markets closed loop) creates new money, creates demand for products and services, and circulates in the economy.

This can be seen in the chart below which shows the nearly perfect correlation between total bank liabilities in the US, as per the Fed’s Flow Of Funds report, and total US GDP.

Bottom line: the BEA can capitalize air consumption if it thinks it will make US GDP soar, but unless new credit and bank liabilities are created not due to forced supply but demand, and unless the private financial sector is finally willing to start lending money (which for the entire duration of QE it has not) US growth will stall and then proceed to decline.

Case in point: total US commerical bank loans are still lower than they were the day Lehman filed.

In other words, all the GDP “growth” since the Lehman failure has come on the back of money “created” by the Fed.

And there are still those who think the Fed will ever unwind…

http://www.zerohedge.com/news/2013-04-21/us-gdp-will-be-revised-higher-500-billion-following-addition-intangibles-economy

EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, FRIDAY, APRIL 26, 2013
BEA 13-18

* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.

Lisa S. Mataloni: (202) 606-5304 (GDP) gdpniwd@bea.gov
Recorded message: (202) 606-5306
Jeannine Aversa: (202) 606-2649 (News Media)
National Income and Product Accounts
Gross Domestic Product, First Quarter 2013 (advance estimate)
      Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 2.5 percent in the first quarter of 2013 (that
is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the
Bureau of Economic Analysis.  In the fourth quarter, real GDP increased 0.4 percent.

      The Bureau emphasized that the first-quarter advance estimate released today is based on source
data that are incomplete or subject to further revision by the source agency (see the box on page 3 and
"Comparisons of Revisions to GDP" on page 5).  The "second" estimate for the first quarter, based on
more complete data, will be released on May 30, 2013.

      The increase in real GDP in the first quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), private inventory investment, exports, residential investment,
and nonresidential fixed investment that were partly offset by negative contributions from federal
government spending and state and local government spending.  Imports, which are a subtraction in the
calculation of GDP, increased.

BOX_______________________
     Comprehensive Revision of the National Income and Product Accounts

     BEA plans to release the results of the 14th comprehensive (or benchmark) revision of the national
income and product accounts (NIPAs) in conjunction with the second quarter 2013 "advance" estimate
on July 31, 2013.  More information on the revision is available on BEA’s Web site at
www.bea.gov/gdp-revisions, including a link to an article in the March 2013 issue of the Survey of
Current Business that discusses the upcoming changes in definitions and presentations, including
capitalizing spending on research and development and on entertainment originals and measuring
transactions of defined benefit pension plans on an accrual accounting basis.  An article in the May
Survey will describe changes in statistical methods, and an article in the September Survey will describe
the estimates in detail.  Revised NIPA table stubs and news release stubs will be available in June.

FOOTNOTE___________________

      Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise
specified.  Quarter-to-quarter dollar changes are differences between these published estimates.  Percent
changes are calculated from unrounded data and are annualized.  "Real" estimates are in chained (2005)
dollars.  Price indexes are chain-type measures.

      This news release is available on www.bea.gov along with the Technical Note and highlights related to this release.
___________________________

      The acceleration in real GDP in the first quarter primarily reflected an upturn in private
inventory investment, an acceleration in PCE, an upturn in exports, and a smaller decrease in federal
government spending that were partly offset by an upturn in imports and a deceleration in nonresidential
fixed investment.

      Motor vehicle output added 0.24 percentage point to the first-quarter change in real GDP after
adding 0.18 percentage point to the fourth-quarter change.  Final sales of computers subtracted 0.01
percentage point from the first-quarter change in real GDP after adding 0.10 percentage point to the
fourth-quarter change.

      The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 1.1 percent in the first quarter, compared with an increase of 1.6 percent in the fourth.
Excluding food and energy prices, the price index for gross domestic purchases increased 1.3 percent in
the first quarter, compared with an increase of 1.2 percent in the fourth.

      Real personal consumption expenditures increased 3.2 percent in the first quarter, compared with
an increase of 1.8 percent in the fourth.  Durable goods increased 8.1 percent, compared with an increase
of 13.6 percent.  Nondurable goods increased 1.0 percent, compared with an increase of 0.1 percent.
Services increased 3.1 percent, compared with an increase of 0.6 percent.

      Real nonresidential fixed investment increased 2.1 percent in the first quarter, compared with an
increase of 13.2 percent in the fourth.  Nonresidential structures decreased 0.3 percent, in contrast to an
increase of 16.7 percent.  Equipment and software increased 3.0 percent, compared with an increase of
11.8 percent.  Real residential fixed investment increased 12.6 percent, compared with an increase of
17.6 percent.

      Real exports of goods and services increased 2.9 percent in the first quarter, in contrast to a
decrease of 2.8 percent in the fourth.  Real imports of goods and services increased 5.4 percent, in
contrast to a decrease of 4.2 percent.

      Real federal government consumption expenditures and gross investment decreased 8.4 percent
in the first quarter, compared with a decrease of 14.8 percent in the fourth.  National defense decreased
11.5 percent, compared with a decrease of 22.1 percent.  Nondefense decreased 2.0 percent, in contrast
to an increase of 1.7 percent.  Real state and local government consumption expenditures and gross
investment decreased 1.2 percent, compared with a decrease of 1.5 percent.

      The change in real private inventories added 1.03 percentage points to the first-quarter change in
real GDP after subtracting 1.52 percentage points from the fourth-quarter change.  Private businesses
increased inventories $50.3 billion in the first quarter, following increases of $13.3 billion in the fourth
quarter and $60.3 billion in the third.

      Real final sales of domestic product -- GDP less change in private inventories -- increased 1.5
percent in the first quarter, compared with an increase of 1.9 percent in the fourth.

Gross domestic purchases

      Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 2.9 percent in the first quarter; it was unchanged in the fourth quarter.

Disposition of personal income

      Current-dollar personal income decreased $109.1 billion (3.2 percent) in the first quarter, in
contrast to an increase of $262.3 billion (8.1 percent) in the fourth.  The downturn in personal income
primarily reflected a sharp downturn in personal dividend income and a sharp acceleration in
contributions for government social insurance -- a subtraction in the calculation of personal income.
Fourth-quarter personal dividend income was boosted by the payment of accelerated and special
dividends. The acceleration in contributions for government social insurance in the first quarter resulted
from the expiration of the "payroll tax holiday."

      Personal current taxes increased $27.2 billion in the first quarter, compared with an increase of
$34.3 billion in the fourth.

      Disposable personal income decreased $136.3 billion (4.4 percent) in the first quarter, in contrast
to an increase of $228.0 billion (7.9 percent) in the fourth.  Real disposable personal income decreased
5.3 percent, in contrast to an increase of 6.2 percent.

      Personal outlays increased $116.3 billion (4.1 percent) in the first quarter, compared with an
increase of $97.0 billion (3.4 percent) in the fourth.  Personal saving -- disposable personal income less
personal outlays -- was $313.3 billion in the first quarter, compared with $566.0 billion in the fourth.

      The personal saving rate -- personal saving as a percentage of disposable personal income -- was
2.6 percent in the first quarter, compared with 4.7 percent in the fourth.  For a comparison of personal
saving in BEA’s national income and product accounts with personal saving in the Federal Reserve
Board’s flow of funds accounts and data on changes in net worth, go to
www.bea.gov/national/nipaweb/Nipa-Frb.asp.

Current-dollar GDP

      Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
3.7 percent, or $146.1 billion, in the first quarter to a level of $16,010.2 billion.  In the fourth quarter,
current-dollar GDP increased 1.3 percent, or $53.1 billion.

BOX_____________________
      Information on the assumptions used for unavailable source data is provided in a technical note
that is posted with the news release on BEA's Web site.  Within a few days after the release, a detailed
"Key Source Data and Assumptions" file is posted on the Web site.  In the middle of each month, an
analysis of the current quarterly estimate of GDP and related series is made available on the Web site;
click on Survey of Current Business, "GDP and the Economy."  For information on revisions, see
"Revisions to GDP, GDI, and Their Major Components."
________________________

      BEA's national, international, regional, and industry estimates; the Survey of Current Business;
and BEA news releases are available without charge on BEA's Web site at www.bea.gov. By visiting the
site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

                                           *          *          *

                              Next release -- May 30, 2013, at 8:30 A.M. EDT for:
                              Gross Domestic Product:  First Quarter 2013 (Second Estimate)
                              Corporate Profits:  First Quarter 2013 (Preliminary Estimate)

                                            Comparisons of Revisions to GDP

     Quarterly estimates of GDP are released on the following schedule:  the "advance" estimate, based on
source data that are incomplete or subject to further revision by the source agency, is released near the end of the
first month after the end of the quarter; as more detailed and more comprehensive data become available,
the "second" and "third" estimates are released near the end of the second and third months, respectively.
The "latest"” estimate reflects the results of both annual and comprehensive revisions.

     Annual revisions, which generally cover the quarters of the 3 most recent calendar years, are usually carried
out each summer and incorporate newly available major annual source data.  Comprehensive (or benchmark)
revisions are carried out at about 5-year intervals and incorporate major periodic source data, as well as
improvements in concepts and methods that update the accounts to portray more accurately the evolving U.S.
economy.

The table below shows comparisons of the revisions between quarterly percent changes of current-dollar
and of real GDP for the different vintages of the estimates.  From the advance estimate to the second estimate (one
month later), the average revision to real GDP without regard to sign is 0.5 percentage point, while from the
advance estimate to the third estimate (two months later), it is 0.6 percentage point.  From the advance estimate to
the latest estimate, the average revision without regard to sign is 1.3 percentage points.  The average revision
(with regard to sign) from the advance estimate to the latest estimate is 0.2 percentage point, which is larger
than the average revisions from the advance estimate to the second or to the third estimates.  The larger average
revisions to the latest estimate reflect the fact that comprehensive revisions include major improvements, such as
the incorporation of BEA’s latest benchmark input-output accounts.  The quarterly estimates correctly indicate the
direction of change of real GDP 97 percent of the time, correctly indicate whether GDP is accelerating or
decelerating 72 percent of the time, and correctly indicate whether real GDP growth is above, near, or below trend
growth more than four-fifths of the time.

                           Revisions Between Quarterly Percent Changes of GDP: Vintage Comparisons
                                                     [Annual rates]

       Vintages                                   Average         Average without     Standard deviation of
       compared                                                    regard to sign      revisions without
                                                                                         regard to sign

____________________________________________________Current-dollar GDP_______________________________________________

Advance to second....................               0.2                 0.6                  0.4
Advance to third.....................                .1                  .7                   .4
Second to third......................                .0                  .3                   .2

Advance to latest....................                .3                 1.2                  1.0

________________________________________________________Real GDP_____________________________________________________

Advance to second....................               0.1                 0.5                  0.4
Advance to third.....................                .1                  .6                   .5
Second to third......................                .0                  .2                   .2

Advance to latest....................                .2                 1.3                  1.0

NOTE.  These comparisons are based on the period from 1983 through 2009.

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