‘NUM­BERS FOR GDP, IN­FLA­TION ARE OFF’

Mea­sure­ment tools un­der­stat­ing growth, say US agen­cies

New Straits Times - - Business World -

WASH­ING­TON

TOP of­fi­cials from two United States govern­ment eco­nomic-sta­tis­tics agen­cies say their mea­sure­ment tools are un­der­stat­ing growth and over­stat­ing some com­po­nents of in­fla­tion by mod­est amounts, while cau­tion­ing that this does not ex­plain the slug­gish ex­pan­sion in re­cent years.

“The Bureau of Labour Sta­tis­tics and Bureau of Eco­nomic Anal­y­sis agree that price in­dex mis­mea­sure­ment con­tin­ues to lead to un­der­stated growth in re- al out­put over time,” wrote five cur­rent and for­mer of­fi­cials from the agen­cies in a pa­per pub­lished on May 3 in the Amer­i­can Eco­nomic As­so­ci­a­tion’s Jour­nal of Eco­nomic Per­spec­tives and pre­sented last week.

Econ­o­mists have ques­tioned whether agen­cies are keep­ing up with changes re­sult­ing from an in­creas­ingly digi­tised and in­no­va­tion-based econ­omy.

The an­swer: It’s hard, es­pe­cially in tech­nol­ogy and med­i­cal ser­vices where in­no­va­tions can be rapid and the re­sults hard to cap­ture. Health­care spend­ing rep­re­sented about 17.5 per cent of gross do­mes­tic prod­uct (GDP) in 2014, they noted.

Look­ing at the per­sonal con­sump­tion com­po­nent of GDP, the au­thors find that price mea­sures likely show an over­state­ment of 0.2 per­cent­age points in 2000, ris­ing to 0.26 per­cent­age points in 2015. If in­fla­tion is over­stated, real GDP is un­der­stated.

Com­bined with some mis­mea­sure­ment of qual­ity changes in com­puter and soft­ware in­vest­ment, the to­tal ef­fects would mean GDP growth is un­der­stated by about 0.4 per­cent­age point for 2000, 2005, 2010 and 2015, ac­cord­ing to the pa­per. Bloomberg

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