Doug Kass: Lies, Damned Lies and Statistics
Misleading economic data get us into trouble... often!
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The header of course refers to the famous quote by Mark Twain, implying that statistics can be manipulated to present a misleading picture, essentially acting like a lie...
On Friday night I saw this regarding expected Q1 2025 GDP from the Atlanta Fed:
Atlanta Fed GDPNow Estimate for 2025: Q1
That "august" body revised its GDPNow forecast from +2.3% down to -1.5%, a ~4% delta. This is about the sharpest change over a short period of time, with no big exogenous event or shock, that I can remember. This is the equivalent of an aircraft carrier somehow being able to turn like a motorcycle.
I cannot tell how much of the revision is due to G, and how much is due to softening consumer spend (they are both related), and how much is other factors (home sales, etc.). The markets (debt and equity) seem to be sniffing this one out, especially the debt markets. Granted, we are still early in the data cycle. I would be surprised if it is this bad, but who knows.
Who knows what GDP will turn out to be, but it is one more example of a somewhat poor and misleading economic statistic. I think poor and misleading economic statistics get us into trouble, often.
Obviously, if the G goes down it is a problem for the economy. The problem becomes bigger when G going up is what was propping the economy up to begin with. Nobody should have thought things were as good as they looked, because a fair bit of it was the G. Politicians do this for a reason, and they should not be rewarded for trying to buy votes and elections.
Digging a hole and filling it back up increases G over the short term, but is harmful over the mid-to longer term. Hiring regulators increases G over the short term, is harmful to businesses and the economy over the mid-to longer term. You could take everyone that is making cars and put them to work at the DMV for the same salary. Nobody would have cars, but GDP stays the same.
We might want to start looking more closely at GDP without the G, and employment without the G. These numbers exist, but policy makers seem to ignore them.
Post Script: The economic statistics problem is made worse when the numbers are fraudulent. I have long expressed cynicism regarding the methodology underpinning inflation numbers. Recently, it appeared the employment numbers (in addition to being a lot of government) were outright fraudulent, probably for political reasons.
We saw what happened with the massive downward revisions at the end (which might not have been enough). This garbage cannot be allowed to happen, ever again. There is a human tendency, even when knowing data is no good, to go along with what it implies, if it is convenient and expedient to do so, for political, career, or other reasons (gutless).
This commentary was originally posted in Doug's Daily Diary on TheStreet Pro.
