Squint, and the picture will look better

Back in Jackson Hole:

HILSENRATH: Dennis Lockhart, president of the Federal Reserve Bank of Atlanta. We’re here in Jackson Hole, talking about the economy. So give us your read: How is the U.S. economy doing right now?

LOCKHART:I think the U.S. economy is expanding at a modest pace. The second quarter (gross domestic product) number—which was 1.1 (percent annual rate of growth), just revised slightly yesterday—I think overstates the slowdown or a slowdown. We have been looking through that number to an account in the GDP accounts called real final sales, which is GDP less inventory.

And what we see there is a better picture and a more consistent picture over the last few quarters. So I think the economy is chugging along, and I’m not one who is interpreting the headline GDP number as somehow suggesting that we have slowed from what was already a slow expansion.

The picture over the past two years strongly contradicts Lockhart: The economy has been slowing for the past two years.

Squint_1

That´s not surprising because all those measures of aggregate nominal activity give out the same information over long periods.

Squint_2

PS I remember that a couple of years ago, some were favoring GDI. At the time GDI was higher than the other measures…But then again:

ABSTRACT  The two official measures of U.S. economic output, gross domestic product (GDP) and gross domestic income (GDI), have shown markedly different business cycle fluctuations over the past 25 years, with GDI showing a more pronounced cycle than GDP. This paper reports a broad range of results that indicate that GDI better reflects the business cycle fluctuations in true output growth. Results on revisions to the estimates, and correlations with numerous other cyclically sensitive variables, are particularly favorable to GDI. The most recent GDI data show the 2007–09 downturn to have been considerably worse than is reflected in GDP.

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