Sunday, July 5, 2015

The Puzzle of Weak First-Quarter GDP Growth

The Federal Reserve Bank of San Francisco (in a recent letter by Rudebusch, Wilson, and Mahedy) shows that after correcting for seasonal factors (i.e. bad weather) the first quarter grew at an annual rate closer to 1.8% (opposed to the official 0.2%). This is good, but given how difficult estimating GDP has become, how reliable of a measure is it really? Can anyone think of something better to measure the state of the economy?


3 comments:

  1. GDP needs to be revamped to take into account additional economic factors that aren't presently reflected. We've discussed how GDP is not a good measure of welfare and I think this is what we need to fix. If welfare was included in GDP, we would have a much more accurate depiction of how well an economy is really doing. I'm not much of an economist, so figuring out how to include welfare would be a daunting challenge.

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  2. One factor that I think should be included in GDP is technology. Moore's law observes the pattern of growing technology: technology (specifically computer software and artificial intelligence) will double every two years, making it progressively cheaper and cheaper to buy. For example, the first iPod broke technological barriers and was expensive. Now, because technology has advanced so quickly, that same iPod is extremely cheap/essentially worthless. If we can use Moore's law to assign a numerical value to technology in a given year, we can use it to help determine/measure GDP. While it may not be a direct contribution (because it would not be a monetary value), we can use it to help determine the other factors of GDP and the effect that they have on GDP.

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  3. The weak first quarter is obviously a signal to many things, as a trader we need to have solid eyes to be aware of all this because without that we can never be successful, I am lucky that I am working with OctaFX broker where I get massive advantage with their rebate program, it helps me earn 15 dollars profits per lot size trade and that too includes the losing ones, so that’s why I am able to work easier and that allows me to succeed.

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