Changing the past: New GDP numbers

Yesterday, Statistics New Zealand released fancy new GDP figures for the New Zealand economy.  The new industry classification it uses (ANZSIC06) provides a more consistent, and modern, treatment of different industries in terms of production GDP – and in this sense, it is going to be exciting going through and seeing what this data series says about the evolution of the New Zealand economy.

However that is not what I’m going to do here 😉

Instead, I’d like to point out a couple of things from the release that Stat’s NZ nicely provided:

  1. A mixture of new annual benchmarks and significant revisions (based on other changes in methodology) has led to a significant downward reduction in estimated expenditure GDP over the past two years.  If we felt this series best represented the evolution of production in NZ (which is likely doesn’t), then we could very much make the case that we experienced a “double-dip” in late-2010.
  2. If we look at primary, goods producing, and service industries under the current classification and with new annual benchmarks, the ratio of real goods producing GDP to total real GDP is higher than it was.  Talking about how low this ratio was for a time informing policy.   To me this change in the data simply indicates that people have to be careful looking at ratios of real variables – a concern should rely on an observable market or government failure, rather than be built solely off a nice looking graph.

I will be spending a lot of the next month rolling around in these figures, and occasionally I might pop on here and say something who knows 😉

  • Matthew

    Do you agree with this guy that the revisions tell us there is more scope to cut rates?

    http://ricardianambivalence.com/2012/05/15/snail-flys-past-kiwi-on-the-gdp-revisions/

    • I would note that it is only GDP that has been revised down – not growth in consumer prices.  As a result, a downward revision doesn’t immediately tell us that the output gap is larger.  Instead, potential output could be lower.

      This is why, when looking at output gaps in real time, I prefer to look at CPI and UR figures instead of GDP figures – GDP is constantly revised, and a small open economy suffers from external shocks to potential all the time.

      The fact that current economic momentum is a bit weaker than previously estimated might make a rate cut slightly more likely.