The BEA announced today that economic growth in the third quarter wasn’t 2.8 percent after all. It was 3.6 percent. But the conventional wisdom on this congealed instantly: the entire revision was due almost entirely to a buildup in inventories, not final sales, so it doesn’t mean much. If businesses are building up inventories this quarter, they’ll probably cut back next quarter and it will all come out in the wash.
That’s all true enough, but I think discretion is the better part of wisdom here. It’s way too easy to start diving into the details of every GDP report and every employment report, looking for nuances that suggest things are either better or worse than the headline number suggests. Most of the time, though, I think you miss the forest for the trees when you do this. There’s always something in these reports that you can point to as evidence for either optimism or pessimism. You can do it every quarter. In the end, though, I think you’re better off taking the headline number at face value and not worrying too much about the details. (Unless, of course, you’re analyzing the details for their own sake. If you’re writing a report about inventory levels, then go ahead and pay attention to the inventory numbers.)
As it happens, however, this time around there probably really is some reason for caution. As Matt Yglesias points out, “Gross Domestic Income—an alternative procedure for counting up the same concept that GDP measures—rose only 1.4 percent in this report. The GDI approach is generally more accurate, further underscoring there are a lot of dark clouds to this silver lining.” I don’t know for sure that GDI is “generally” more accurate, but it certainly has some advantages over GDP measurements, and even if you just average the two you get a third quarter growth rate of 2.5 percent. That’s not terrible, but it’s not great either. More aggregate demand, please.