Tags: us | economic | data | revisions

Cook the Books? Revisions Cast Doubt on Accuracy of US Economic Data

Cook the Books? Revisions Cast Doubt on Accuracy of US Economic Data
(Christoph Burgstedt/Dreamstime)

By    |   Tuesday, 16 January 2018 07:45 AM

Today is one of those days where we will have to do it without real hard U.S. economic data.

The only thing we get today is the New Yokr Empire State Manufacturing Survey, which is of course an opinion poll that is not backed by hard economic data.

So, in the U.S. it’s politics that dominates again and the chances of a government shutdown at the end of the week grew yesterday as Republicans concluded that they would be unable to reach a long-term spending accord by the Friday deadline.

GOP leaders are now turning to a short-term funding measure in hopes of keeping agencies open while talks continue, but Democratic leaders say they are unlikely to support any deal that does not protect young illegal immigrants.

The last government shutdown happened in 2013, October 1–16, under President Barack Obama. During the shutdown, approximately 800,000 federal employees were indefinitely furloughed, and another 1.3 million were required to report to work without known payment dates.

We will also get the release of China’s GDP for Q4. It’s interesting to see how media now are suggesting that the data will “understate growth” in 2017 because previous years data had “overstated” economic growth. 6.7 percent y/y in Q4 of 2017 on debt and pollution clamp-down is expected.

That said, most of us know that Chinese growth data might probably prove to be unreliable and that is certainly not a terrible shock to investors.

Now, for investors it could be worthwhile remembering that the Chinese are not alone in having dubious data.

The accuracy of U.S. economic data is increasingly being called into question. Data revisions in the United States are becoming larger and larger and more and more frequent. The difference perhaps is that the Chinese data is not politically independent, while the inaccuracy of the U.S. data reflects underfunding and inability to keep up with ongoing structural change in the U.S. economy.  

Besides all that, we have some inflation data coming out in the European time zone that could be of some interest for investors who have euros in their portfolios.

German consumer price inflation (CPI) came in at 1.7 percent year-on-year in December 2017, down from 1.8 percent in November.

German producer prices (PPI) came in at 2.5 percent year-on-year in November, down from a 2.7 percent in October and down from 3.1 percent in September.

These inflation data do certainly not indicate that the German economy has started to slow down, but as Germany is by far the first economy (GDP) of the Eurozone that on basis of data provided by the IMF had in 2016 a nominal GDP of 3.479 trillion euro or about $4.25 trillion dollars, which showed that the German economy was about 1trillion euro bigger than the Euro area’s second economy, which was France that in 2016 delivered a nominal GDP of 2.466 trillion euro or about $3 trillion dollar.

These slowing inflation numbers in Germany are important in the context of the rising exchange rate of the euro an widespread expectations that the European Central Bank (ECB) could start raising its interest rates rather sooner than later.

Never forget that the “primary” objective of the European Central Bank (ECB) is price stability and in function of that, the ECB aims to maintain inflation rates below, but close to, 2% over the medium term.

Finally, the “currency-wannabe” that is Bitcoin, is having another high inflation borderline hyperinflation episode as its spending power plunges once again.

It is possible that someone has found a way selling this thing, or it is possible that no one is selling and there is simply an absence of demand.

It is probably too soon to declare the bursting of the Bitcoin bubble, but the inability to reduce the supply of Bitcoin is starting to tell as governments deliberately seek to restrict demand.

Interestingly, the German Bundesbank, which understands a thing or two about failing to cut supply as was the case during the hyperinflation era during the Weimar Republic from 1918 to 1924 has suggested a global role might be needed, and there is clearly that the bubble is brought to an end by a series of national attacks on specific sources of demand.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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The accuracy of U.S. economic data is increasingly being called into question. Data revisions in the United States are becoming larger and larger and more and more frequent.
us, economic, data, revisions
Tuesday, 16 January 2018 07:45 AM
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