Real GDP Growth for 2021 IV

U.S. PReal GDP for 2021 IV came out this morning. Here's the press release from the BEA.

One month after the end of the quarter, the BEA releases it's rough draft of GDP. This is called the "Advance Estimate". After another month they'll release a revision. A month after that they'll release the finished number.

And then, as we'll mostly discuss in February, they'll periodically update the data to reflect improvements in how to measure quality and prices. So that final number won't be final forever, but will be changed every so slightly every year or two. There's no plan or schedule for those, and the modifications are not large. With the passage of time, the older data gets modified less and less.

***

This morning's release shows real GDP growing at a 6.9% rate for 2021 IV. That rate is annualized, and is based on percentage growth rates. Those are the ones you learn about in middle school. They're what everyone thinks of growth rates. But they're non-linear.

In time series in macroeconomics and finance, percentage growth rates are avoided in favor of differences of natural logs, which produce an approximate growth rate. Few people in the literature note that it's an approximation, but we all know that it is, and you do too now. This approximation works best for growth rates near zero. In class, I'll show that the divergence between the two methods for growth rates this size is large enough to be noticeable, but probably not enough to make much difference in our analysis. In any event, that probably doesn't matter much: the huge advantage of taking logs and differences — that after that the math is linear — swamps concerns about the approximation sometimes being slightly inaccurate.

The growth rate for this quarter is an improvement over 2021 III, so that's good.

But, a big thing we've been worried about is how much of the high growth rates of the last several quarters is just making up losses from the lockdowns. More on that in class with spreadsheets!