Stats are not actual facts, they are artifacts

 

GDP

GDP

Prices

 

$ Millions

$ Millions

       D08=100

 

Trend

Trend

 

 

Current Prices

Chain Volume

 

Dec-2008

315583

315298

100.0

Mar-2009

312921

315942

99.0

Jun-2009

310338

317495

97.7

%Change

 

 

 

D08-J09

-1.7

0.7

-2.3

         

Nothing to see here, really, but just thought I would mention it. The Government has made it its claim to economic competence that we, uniquely, avoided recession during the Great Recession. Close run thing, of course, but we never had two consecutive quarters of falling GDP.

Except, as it turns out, we did. And these contractions were not small. As the first column shows, GDP went from $315,583m in December 2008 to $312,921m in March 2009 and then to $310,338M in June 2009. Two consecutive quarters of falling GDP without doubt, with the only point to note being that these figures are in current prices. Over the half year period GDP fell by 1.7%, again I note in current prices.

The constant price data show a relatively strong outcome, with the increase over this half year period 0.7%. The period the national accounts indicate growth rates of 0.1% and 0.0% were the September and December quarters of 2008. The half year period where we find nominal GDP falling but real GDP rising takes place six months later.

So how did we end up with a fall in nominal GDP leading to a rise in real GDP. The price level embedded in the national accounting stats fell even more, in this case by 2.3%.

Sure, why not? For what it’s worth, the CPI over the same period rose by 0.6%.

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40 Responses to Stats are not actual facts, they are artifacts

  1. m0nty

    Q. What is the difference between a current price and a chain volume?

    A. Gross Domestic Product is measured as a percentage change in dollar values from year to year. This is the only way to combine all goods and services transactions into a common unit of measurement.

    When measured at current prices, GDP will be recorded in dollar values of that year.

    Current prices do not take into account price changes over a time series. This means that the National Accounts may show that the amount spent on cars is three times as much as the previous year, when in actual fact the volume of cars has remained the same but the change is solely in the price of the cars.

    Chain volume measures remove the effect of price changes by measuring how physical volumes have changed rather than how the total value has changed.

  2. Steve Kates

    I was on the ABS’s Australian Statistical Advisory Council and on their Macroeconomic Statistics Advisory Group when they were developing the chain volume measures. I understand them well enough, I think, but you do have to admit this is a curious result.

  3. m0nty

    Is it not possible to drill down into the ABS numbers and discover the reason/s for the discrepancy?

  4. blogstrop

    Don’t worry about monty, Steve. He just comes out to rattle his chain volume measures from time to time.

  5. .

    Falling prices and real GDP. Keynesian policy fail.

  6. brc

    Keynesian policy fail is a redundant term, like ATM machine or PIN Number.

    All Keynesian policies are failures. If you wanted to say something different, you would say ‘Keynesian policy success’. But one has never been recorded, so it’s a completely hypothetical term.

    Sure, you can get a 6 month sugar rush from throwing money around. But in the long term it will be worse. The knave tried to explain away this by saying ‘we’ll all be dead’. Apparently that is what passed for intellectual thought- bugger the long term consequences, I want some popularity now.

    Little wonder politicians lap at the Keynes bowl with their ears pinned back.

  7. sdfc

    I’ve got two words to say to you Steve. Trade prices.

  8. Alex Robson

    Is there really that much that is curious about the GDP deflator sometimes moving differently from the CPI? They are measuring different things. The former is a much broader measure of price changes than the latter. And the weights in the GDP deflator are updated annually, rather than every 5-6 years like the CPI. And it is well known that for a range of reasons, the CPI overstates actual inflation.

    And if the GDP deflator is falling, is there anything really curious about nominal GDP falling at the same time that real GDP is rising?

  9. Louis Hissink

    Implicating Say’s Law, economic statistics should show increasing economic activity as positive indices, and, obviously, decreases as negative.

    As Say’s law is explicitly a recognition that stimulating an economy demands stimulating its productive section, not its consuming section, then what are you folks discussing here? Mathematics or non-human action?

  10. On your Marx

    SDFC is right again of course.

    What the trend figures show us is that we did indeed need a stimulus.
    It shows us that by smoothing out the SA figures.

    We were headed for a shipwreck.

    Very silly to call anything a fail which had only a little bit of one measure in it and then to examine through a prism of trend figures.

  11. .

    What the trend figures show us is that we did indeed need a stimulus.
    It shows us that by smoothing out the SA figures.

    Ridiculous Homer. This is the first time you have ever justified using trend figures.

    “We needed to smooth out SA figures so we calculated a demand management solution in trend figures”

    You are kidding yourself Homer.

    sdfc – no anaomoly exists elsewhere.

    You too are kidding yourself pal. Just look at the evidence.

  12. sdfc

    Dot

    The nominal GDP figures reinforce what I have been saying all along. That national income experienced sharp decline as a result of the slump in export prices.

    Dot
    The nominal GDP figures reinforce what I have been saying all along. That national income experienced sharp decline as a result of the slump in export prices.

    Whether Australia experienced two consecutive quarters of decline in real GDP is neither here nor there. For instance real domestic demand and GNE both shrank for two consecutive quarters. GDP was only kept out of negative territory in March 09 because of a sharp fall in import volumes.

  13. .

    The nominal GDP figures reinforce what I have been saying all along.

    You said the stimulus didn’t work? Thanks!

  14. Gavin R. Putland

    Yes, it was a recession in all but name. At the time, I called it “the recession we had to deny“.

    On Keynesian responses I concluded that “the various stimulus measures to date have merely delayed the inevitable.”

  15. sdfc

    Only if you are a simpleton Dot who thinks that a 0.5% defline is some sort of limit.

  16. sdfc

    What is the point of pulling people up on typos on a blog?

  17. JC

    That national income experienced sharp decline as a result of the slump in export prices.

    So ummmm monetary policy, the exchange rate and of course the steep climb back in the terms of trade… they had no impact. It was only the Lurch/Rudd insulation fiasco and the school dunny programs that kept us out of trouble.

    lol

  18. .

    What is the point of pulling people up on typos on a blog?

    Because your sentence is nonsense. It’s not really the typo I was having a go at in particular.

    I see. You must have meant decline. Now it’s not nonsense, just esoteric.

    Handing out $900 cheques three months later stopped imports when the dollar went down? Um okay. Borrowing money to buy questionable education capital expenditure six months later reduced imports as well?

    You’re gonna have to explain how those two examples in particular worked.

  19. JC

    You’re gonna have to explain how those two examples in particular worked.

    Like love, Keynesianism is never having to say you’re sorry.

  20. sdfc

    JC

    We are discussing whether Australia can be said
    We have been through this on numerous occasions unless you have something fresh to contribute why bother? It really is deja vu all over again.

    Dot

    You miss the point entirely. Let me say it again, the reason we didn’t get two successive quarters of declining real GDP is because of the positive contribution of a fall in import volumes. Falling import volumes are not a sign of economic strength.

    Domestic demand, which is what really matters for employment, fell 0.5% in Q4 08 and again in Q1 09.

  21. JC

    We are discussing whether Australia can be said

    What fuck is that supposed to mean? Stay off the booze.

  22. JC

    and if you make the same stupid arguments, you get the same replies, SDFC. Stop being an interminable idiot.

  23. .

    Dot

    You miss the point entirely.

    No, you fail to rebutt cogent arguments against Keynesian policy.

    If you can’t explain how it works, it is a load of cobblers.

    This is economics, not theology.

  24. sdfc

    JC

    I save my drinking for a Friday night JC and as much as I can tolerate arguing the same thing over and over again when I’ve had a few. I find your consistent idiocy a little dull when sober.

    Take your comment at 8:30 for instance which came even after I said “forget the first line”. Maybe I should have used the nancy-boy oops as you are inclined to do when you make a blue.

    We were discussing the national accounts. Of course you have nothing to add because you are a buffoon. And a dull one at that.

  25. sdfc

    Dot

    There was no argument for or against Keynesian policy. It was a statement on the composition of GDP.

    Just calling something a failure does not constitute an argument. I should be used to the lack of coherent argument however it seems par for the course on this site.

    Even when I make a statement that amounts to agreeing with Steve that the economy for all intents and purposes did get two quarters of negative growth you still don’t seem to get it. Too busy getting all worked up at the enemy I suppose.

    As for how Keynesian policy works. Cash flow, as I have said over and over again. If you are going to criticise at least have the decency to comprehend what I have been arguing the past couple of years.

  26. JC

    As for how Keynesian policy works. Cash flow, as I have said over and over again

    It’s borrowed money you dope. The government borrows a ton of it, gives to the constituencies it wants to favor and then has to repay it, limiting potential growth. In other words we’re eating the future…well not all of us, only those favored few and we all end up paying.

    That’s the “cash flow” racket you support, SDFC, you lunatic.

  27. .

    Just calling something a failure does not constitute an argument

    I didn’t do that.

    I want you to explain how the following helps us in a demand shock:

    Handing out $900 cheques three months later stopped imports when the dollar went down? Um okay. Borrowing money to buy questionable education capital expenditure six months later reduced imports as well?

    You’re gonna have to explain how those two examples in particular worked.

    I remind you that 40% of the stimulus cheques were saved.

    Cash flow, as I have said over and over again.

    This explains absolutely nothing.

    If you respond that asking questions is “missing the point” once again, you’re obviously not being honest or serious.

  28. JC

    If you respond that asking questions is “missing the point” once again, you’re obviously not being honest or serious.

    He’s just being an idiot as usual. He can’t help himself.

  29. sdfc

    JC

    It’s funny how you hold yourself up as a financial guru yet seem to think that once money is spent it is extinguished in some way.

    Dot

    Borrowing money to buy questionable education capital expenditure six months later reduced imports as well?

    No one has said that but you. Posting it again just confirms you have no idea.

    No use for the last comment JC. I already know you are a numbnut.

  30. .

    No one has said that but you. Posting it again just confirms you have no idea.

    I made no misstatement of fact.

    Please tell me why this proves I have “no idea” given the justification for the stimulus you gave earlier?

  31. sdfc

    What the hell are you talking about?

    Who said spending in Q2 and Q3 09, caused imports to fall in Q4 08 and Q1 09? Which afterall is the period of time we were talking about as per Steve’s post.

  32. .

    What the hell are you talking about?

    Who said spending in Q2 and Q3 09, caused imports to fall in Q4 08 and Q1 09? Which afterall is the period of time we were talking about as per Steve’s post.

    Um, you know, how the stimulus ACTUALLY was implemented.

  33. sdfc

    No you brought up the stimulus. I didn’t bring it up because I thought it would make a change to actually discuss the national accounts during the height of the GFC.

    Silly me I should have known you’d want to go over the same ground for the umpteenth time.

  34. .

    sdfc sure I brought it up, now can you even follow your own argument or do you concede that stimulus doesn’t work, or are you just avoiding the question?

    Why bring up “trade prices” and “the stimulus is how you reduce imports” but also “cash flow” etc if you’re not making that argument?

  35. sdfc

    Trade prices were the reason for the decline in NGDP. No one said stimulus reduced imports. It was a decline in domestic demand that lowered imports.

    I bought up cash flow in response to a comment by you. My initial comments were regarding the national accounts with no mention of stimulus.

  36. .

    So what you’re saying is your preferred policy response has no direct or indirect mechanisms?

    It’s magic pudding economics alright.

    “It works. Just don’t question how it’s done!”

    Reminds me of something Gillard said.

    I’m not listening to this rudeness, I’ll answer your question and then I’ll give a question to your colleague, thank you very much.

    The cashflow argument is entirely spurious. It isn’t in the GT, you have never laid out a theory of how it works and it is no better than mandating everyone start writing each other IOUs.

  37. RodClarke

    Steve do you have a link for where I can get these numbers?

  38. Steve Kates

    Just go to the ABS website: http://www.abs.gov.au and then to the data on the National Accounts. Then choose amongst which set of data you are looking for. Don’t go into the publication itself, however, unless you want only the most recent numbers.

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