GDP Revisions Show Economy Slowed Earlier Than Originally Reported

The government provided revised GDP figures for the past few years which indicate the economy grew considerably more slowly than originally reported. Every quarter going back through at least the fourth quarter of 2005 had revisions lower. The largest revision was a decrease of -.9% for the third quarter of 2006 which revised GDP for the quarter almost in half to +1.1% from +2% originally reported. GDP was revised lower based on less housing and business investment than anticipated, and slower consumer spending gains. Net, GDP for the years of 2004-2006 was actually .3% lower than initially reported, with 2006 seeing the largest revision lower (2.9% from 3.3%). The trend shows the economy began cooling in 2006 rather than 2007.

Note that the lower GDP also implies that productivity has deteriorated more than previously observed. Economists will be watching the employment figures for revisions to indicated whether hours worked also declined.

Headline inflation was revised slightly higher to 2.8% YoY over the three years, but core held steady at 2.2% YoY.