Bureau of Economic Analysis Revises Numbers

The Bureau of Economic Analysis (BEA) released its 15th comprehensive update of the National Income and Product Accounts data last week. The comprehensive update occurs every five years and revises economic data from the previous five years. Since it is historical data the release does not garner much attention; however, there are important insights to discern from the changes. 

What are the Major Changes?

Most of the updates are trivial in nature, but there are a few major changes to note.

  • Improved Seasonal Adjustment

For the past few years, economists have struggled with adjusting 1stquarter GDP data for seasonal impacts. It appeared that economic data did not properly capture seasonal changes and 1st quarter GDP growth was consistently lower than expected. The BEA attempted to fix this seasonal adjustment in previous updates, but the previous updates did not capture the entire seasonal impact. With this latest update the BEA believes all seasonal changes in the data are now being accounted for. In addition, the BEA will now also release non-seasonally adjusted estimates for quarterly GDP, GDI and their major components. This will allow economists to apply their own estimates of seasonal adjustments. It also may help identify future changes in seasonal trends. 

With the new seasonal adjustments in place Q1 and Q2 GDP growth rates were revised up, while Q3 and Q4 growth rates were revised down. 

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  • Improved Measures of Private Fixed Investment

Technological innovation has always proved difficult for economists to accurately measure. As part of the update the BEA improved calculations for software, medical equipment and communications equipment. The new updates better quantify the investment companies have made into newer technologies like cloud computing. As such, high-tech investment over the last five years was higher than previously reported and is now better aligned with other technology-based investment data available. 

  • Updated Gross Domestic Income


The BEA also revised national income figures over the previous five years. Major changes include increased small business owner income and decreased corporate profits. The larger income attributed to small business owners was the major driver of higher personal income over the years. With personal outlays unrevised, the personal savings rate over the five years increased from 5% to 7%.

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What Does This Mean? 

The most impactful finding in the release is the upward revision to the savings rate. This is significant because for the past couple years the savings rate had declined to levels that could constrain consumer spending moving forward. Consumers appeared stretched and further gains in consumer spending could have faced an uphill battle if the savings rate reverted back toward historical norms. The revised savings rate over the previous five years is now more in line with current cycle averages and it possibly gives more runway for this economic expansion. 

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