Recently, the Bureau of Economic Analysis (BEA) unveiled a significant revision to the past three years of economic data, sending shockwaves through the financial world. This revision paints a grim picture of the U.S. economy, characterized by higher inflation, weaker growth, reduced consumer spending, and an alarming proportion of GDP attributed to government spending. While government statistics are routinely revised to account for minor fluctuations, these latest adjustments raise questions about the reliability of the original data. In this article, we delve into the BEA’s revisions and their implications for the American economy.
Bidenomics downgrade as the Bureau of Economic Analysis revises down the last 3 years of economic data.
Turns out inflation was higher. Growth and income was weaker. And federal spending is now replacing the consumer.
Gems include $1.1 trillion in vanished savings, a 9-sigma… pic.twitter.com/baXa4n5xsc
— Peter St Onge, Ph.D. (@profstonge) October 3, 2023
GDP vs. GDI Divergence:
One of the most glaring disparities highlighted by the BEA’s revisions is the growing divergence between Gross Domestic Product (GDP) and Gross Domestic Income (GDI). In theory, these two measures should closely mirror each other, representing what is bought versus what is sold in the economy. However, as recently as 2021, they showed only a minuscule 0.2% difference. Since then, things have taken a puzzling turn, with GDI remaining stagnant and GDP allegedly surging by almost 2%. Historically, GDP tends to align with GDI, but this disconnect raises concerns about the accuracy of the data.
Consumer Spending and Inflation:
The BEA’s revisions also significantly impacted consumer spending and inflation figures. Consumer spending, which is a critical driver of economic growth, saw downward revisions for five of the past six quarters. The most recent quarter’s revision was particularly striking, plummeting from 1.7% to a mere 0.8%, an exceedingly rare occurrence with a nine sigma miss. This means that such an extreme discrepancy would typically happen only once in 1 quintillion times, making it exponentially more unlikely than winning the Powerball lottery.
Moreover, the BEA acknowledged undercounting prices in its raw data, indicating that the true extent of inflation may have been underestimated for years. The revision, which raised prices in seven out of ten quarters during the Biden administration, underscored the significant impact of inflation on the economy.
Government Consumption vs. Personal Consumption:
One alarming trend that emerges from the BEA’s revisions is the growing dominance of government consumption over personal consumption. For the past year, government consumption has outpaced personal consumption, signaling an increasing influence of government spending on the economy. This shift progressively turns GDP into a measure of government waste rather than a reflection of national prosperity.
Savings and GDP Revisions:
The BEA’s revisions also affected savings figures, slashing approximately 1.1 trillion dollars from what was previously reported. Additionally, the BEA revised GDP figures dating back to 2020, revealing that former President Trump’s economic growth was stronger than initially reported, while President Biden’s growth was weaker, with a four-to-one ratio favoring Biden. These revisions suggest that the economic contraction experienced last year was more severe than previously believed, down by 2%, which is a quarter worse than initially estimated.
The BEA’s revisions raise significant concerns about the accuracy and reliability of government economic data. As the revisions continue to roll in, the American public may start to lose faith in official government statistics. This erosion of trust could lead people to rely on alternative indicators, such as grocery bills or employment data, to gauge the true state of the economy.
In light of the BEA’s recent revisions, the U.S. economy appears to be far weaker than initially portrayed. The growing discrepancies between GDP and GDI, as well as the dominance of government consumption, suggest a worrisome trend. While government statistics are essential for economic analysis, it is crucial to maintain transparency and accuracy to ensure that citizens have a clear understanding of the nation’s economic health. As the revisions continue, it becomes increasingly important to rely on a diverse set of indicators to obtain a more accurate picture of the economy. After all, reality cares little for the narratives spun by paid government statisticians, and it’s essential to remain vigilant in assessing the true state of the economy.