Back Economics

The statistical discrepancy is back — but not bigger than ever

Published on November 27, 2024

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By

Gerard MacDonell

The statistical discrepancy separating aggregate output as measured on the expenditure side (GDP) and as measured on the income side (GDI) got revised wider during the second quarter and it is reported to have widened a bit further during the third quarter.  The two-quarter rate of growth of real GDI is now 75 bps (ar) below the GDP growth rate.  This does not mean that there is not enough income to support expenditure. By definition, income and expenditure are exactly the same in aggregate. What it means instead is that we have reason to debate that aggregate output, income, and expenditure (all same one thing) growth is as strong as the GDP figures suggest. Some would say split the difference, watch Gross Domestic Output (GDO), and figure that actual output is running about 35 to 40 bps weaker than the headline GDP figures imply for the past two quarters.

This may be the news in the GDP release, because the rest looks little changed.  (The revision to real PCE was just as implied by the retail sales revision.) And it is to the softer side. An issue here, though, is that we got sucked down this rabbit hole just a year ago and the discrepancy got mostly revised away. So, I assume people will be a little more skeptical this time around, although I cannot identify a specific reason they should be. Also, this is a lesser issue than it was last go around when the reported discrepancy got reported to have widened to 2.7% by the first quarter of 2024. As mentioned, that got revised away. 

1-2 bps in 10s fair? How the October data on real PCE look may be more important. With the holiday, they come on the same day as the GDP release, i.e., today, at 10:00.


Source: BEA, FH calculations
Data are actual to Q3.

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