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April 2012 Big Picture Report (Part 2)

A couple of months ago, we briefly discussed negative implications of GDP revisions. Here, we examine these revisions in more detail. We close this piece with an overview of global risks, as well as the solution to the problems in Europe.
U.S. GDP data revisions released on July 29, 2011 indicate that the depth of the (officially stated) 2007–2009 recession was deeper than formerly thought. In addition, the subsequent period designated as an “expansion” was not as strong as previously reported.
For instance, previously published estimates reported an annual decrease in GDP of 2.8% between Q4, 2007 and Q2, 2009. However, the revised reports state that real GDP decreased at an average annual rate of 3.5%.
This revised data show that the cumulative decrease over the six quarters of contraction is now estimated at 5.1%, compared with 4.1% in the previously published estimates. This constitutes the largest slide in GDP since the Great Depression (or since the beginning of BEA’s quarterly real GDP estimates which began in 1947). The revised estimates also show larger decreases for Q4, 2008 (-8.9% vs. -6.8%) and for Q1, 2009 (-6.7% vs. -4.9%).

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