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the back story on front page economics

April ■ 2012

“Dewey Defeats Truman”: Be Aware of Data Revisions
Mingyu Chen, Research Associate
“One of the challenges we face as policymakers is the availability of data to assess the state of the economy in real time. Many economic
data series...are subject to subsequent revisions that can be quite sizable and can alter our perceptions of the economic situation.”
—James Bullard, President and CEO, Federal Reserve Bank of St. Louis, 2011

President Harry Truman’s victory in the 1948 election was first announced by the Chicago
Tribune as a loss to New York Governor Thomas Dewey. When even a simple counting of votes
can produce such a large error, imagine the tremendous challenges and pressure for timeliness
and accuracy facing government and private agencies in computing economic indicators for a
$14 trillion economy.1 Collecting the necessary economic information and processing it requires
time and patience. Many people, including investors and policymakers, want information about
current economic conditions as soon as possible so they can make decisions. However, there is
often a trade-off between the timeliness and the accuracy of economic data.2 For this reason,
many data agencies report an initial release based on the available data and staff estimates for
the information that is unavailable. The media frequently use the initial data releases for headline news.
Data revision is somewhat like revising a college writing assignment. Students usually turn
in the initial draft of the assignment. After they conduct more research and receive feedback
from their professor, they revise the draft a few times before submitting the final draft. Similarly,
after agencies that provide data receive additional information and update their initial calculations, the first releases are revised one or more times. The number and frequency of revisions
vary for different data series.3 For example, data for gross domestic product (GDP) generally
undergo two monthly revisions after the initial release. The Bureau of Economic Analysis (BEA)
computes GDP by collecting data from thousands of government and private sources on factors
such as business fixed investment, trade, individual consumption, and government spending.
Four weeks after a quarter ends, the BEA announces its first release of GDP, known as the
advance estimate. Because only 45 to 75 percent of the data are available at this time, the BEA
makes its best estimate for the missing components in order to provide a timely release.4 At
the end of the following month, the BEA publishes the second GDP estimate, which includes
revisions to the advance estimate. Finally, revisions based on more complete information are
reflected in the third GDP estimate provided in the subsequent month.
Estimates made by the BEA in its initial GDP release are often very close to the numbers in
the third estimate. The impact of the revisions in the second and third estimates is usually not
large at dollar levels; generally there is more interest in the impact on growth rates. The chart
shows how each later estimate differs from the advance estimate. On average, the second and
third revisions in GDP growth rates have changed 0.50 percent and 0.54 percent, respectively,
from the advance estimate over the past 11 years.



Percentage change

Federal Reserve Bank of St. Louis

Real GDP Growth Rate

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Advance Estimate


Second Estimate
Third Estimate


Post 2011 Annual Revision





NOTE: The shaded area indicates the recent recession as determined by the National Bureau of Economic Research.
SOURCE: Federal Reserve Bank of St. Louis ALFRED.

Monthly data revisions are not the only type of revision to GDP data. Every July, the BEA
performs a revision that involves more changes and generally has a greater impact on the
data than monthly revisions. This revision comes in two forms: The annual revision is in
response to new seasonal factors and incorporates new source data from the Census Bureau.
The benchmark (comprehensive) revision, which occurs about every five years, includes changes
in methodology and definitions.5 For instance, in 1999 the BEA included computer software
purchases as a part of business fixed investment in calculating GDP; these purchases were generally considered an intermediate input before the revision.6 Annual and benchmark revisions
can affect data going back many years. As the chart shows, the impact of the annual revision in
July 2011 on real GDP growth rates is quite significant compared with the monthly revisions.
Similar monthly, annual, and benchmark revisions occur for many other economic series.
Awareness of these revisions is very important for economists, policymakers, and investors.7
Revisions can change people’s original views on the economy. For example, the 2011 annual
revision of GDP in the chart indicates that the 2007-08 recession was much deeper than originally perceived based on the initial data. Revised data can also change economic forecasts
significantly, which can alter expectations about future economic conditions. Without an understanding of data revisions, policymakers and investors may be misled by the advance release
of data when they make decisions. Therefore, they need to base their decisions on (i) the data
that are currently available and (ii) the expectation for future data revisions. The St. Louis Fed’s
ArchivaL Federal Reserve Economic Data (ALFRED) database contains vintage versions of data
for more than 30,000 series. Access to such data helps decisionmakers evaluate past policies
and investments. ■




Federal Reserve Bank of St. Louis


1 Examples of economic indicators include measures of national output such as GDP, price indexes such as personal consumption expenditure, and labor market measures such as nonfarm payroll employment and the unemployment rate.
2 One of the exceptions is the reporting of financial data such as interest rates and stock prices, which are considered accurate
at the time of reporting.
3 Some data such as initial unemployment insurance claims are revised on a weekly basis; in rare cases, some series are never

For detailed information on how data for computing GDP are collected, see Grimm and Weadock (2008).


For a detailed explanation of seasonal adjustment, see Gascon (2009).


See Kliesen (1999). Intermediate inputs are not directly counted in GDP since they are not final products. Investment, however, is a component of GDP calculation.

See Bullard (2011).

Bullard, James. “Economic Data: Appearance Can Be Deceiving.” Federal Reserve Bank of St. Louis Regional Economist,
October 2011, 14(4), p. 3.
Gascon, Charles S. “Season’s Greetings and Seasonal Adjustments.” Federal Reserve Bank of St. Louis Liber8, January 2009.
Grimm, Bruce T. and Weadock, Teresa L. “Gross Domestic Product: Revisions and Source Data.” Survey of Current Business,
February 2008, 86(8), pp. 11-15.
Kliesen, Kevin. “Putting Business Software Purchases into the National Accounts.” Federal Reserve Bank of St. Louis National
Economic Trends, November 1999.

Page One Economics Newsletter from the Federal Reserve Bank of St. Louis continues the Liber8 Newsletter and provides an informative, accessible
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