Posted by Aloisius 4 days ago
Presumably when they calculated GDP previously, they hadn't seen quite as much imports, but had seen higher spending, thus they misattributed some of it to domestic products rather than imports, though I'm a bit confused as to how they underestimated imports given everything is declared. Perhaps some changes in the price index?
Though other articles talk about the expected GDP next quarter being higher because they don't expect a surge of imports to continue, which makes no sense to me unless one assumes spending remains the same with or without imports.
Our tariffs are tampering with the intelligent monitoring of GDP growth. When the USA expanded tariffs to 155% with China it was effectively an embargo, so imports went away (but exports didn't) and our GDP looked amazing. When the tariffs were brought back to previous rates of 55%, companies bought every import they could (or had them released from bonded warehouses) which has pumped the GDP in the other direction. And it'll likely be the same situation next month because Chinese ports are seeing record numbers as US companies try to buy every piece of inventory they can before these tariffs go back up.
Metrics are gamed as marketing tools rather than assessment tools. There's a clear conflict of interest in the government presenting the metrics that it says to judge them by.
Unemployment is another gamed metric. If you want to get a sense of unemployment, a graph of % employed tells you more than some gamed number like "unemployment" since "unemployment" is a direct measure of political success.
Consumer spending/GDP are also directly used to measure political success, and a metric like "aggregate Visa/Mastercard purchases" is going to give a much better sense of how much people are spending.
During COVID, all cause mortality is a superior metric than COVID attributed deaths because any death attributed to COVID represented a failure of public health policy. We even saw direct attacks on public health monitoring in Florida.
It seems like the only ways to combat this are either states presenting their own metrics to imply national trends based on their own. I definitely wonder what kind of information we could get that is accurate and not gamed to create our own dashboards. Geohot's use of national energy consumption to estimate national productivity was sharp and the type of thing I wish journalists would do.
The people that gather and publish the data are historically pretty unbiased and open about methods. You can go get the raw data and methods. Some of the places that publish them like FRED, are not even under direct political jurisdiction. They are not at all the part of the government that is affected by the data they publish, and being run by a reserve bank puts them at pretty far reach from meddling by DC.
You can't stop politicians from using the data they like most, but don't pretend that ALL of the data isn't available in useful format.
Study the path other autocrats blazed for Trump, who is following and mimicing their tactics pretty closely now. Aggressive Fed interference is on his agenda, as can be seen by the way he likes to keep his fights with Powell constantly in the news cycle.
At least the few adults that are left, along with the market, start getting very upset when certain politicians target the fed.
[1] Not media-quoted or foregrounded for the public.
The media narrative is out of the control of the various statistics bodies, and it is up to the informed reader to seek out better sources if the article they are reading has scanty info. For the record though, FRED is frequently cited as a source in reputable mainstream media (I see it in the NYT all the time). Read The Economist some time, that's an international news source that will deeply report on these stats. Can't be helped if people prefer Fox or other garbage as their news diet.
You are complaining about media literacy and bad journalism, which is an entirely separate issue from the fact that the data both exists, and is extremely easy to access.
The frustration isn’t about access it is about trust.
People want metrics that reflect lived reality and can’t be spun or redefined every election cycle.
It is also possible to try to paint journalists as worst then they are ... that is good for actual quacks that to not like the good data.
Why are we wasting our time having this discussion and not just debating the finer points of Wittgenstein?
Once basic needs are met humans mostly do things for fun and entertainment. Truth seeking is mostly an after the fact justification for what was fun and entertaining in the moment.
Sich meinen, einer regel zu folgen, ist nicht, einer regel folgen.
As if you can go more granular than Producer Price Index by Commodity: Chemicals and Allied Products: Thermoplastic Resins and Plastics Materials https://fred.stlouisfed.org/series/WPU0662
It is like with GDP and unemployment. These are incredibly hard things to measure at the scale of the US economy. How can a thinking person not understand this is beyond me.
Measurement theory is not a subject taught pretty much anywhere? I have a masters in economics and the only reason I have more than an inkling of understanding of these things is via an internship at our nations statistical bureau.
You get taught to think With numbers. Thinking About numbers is pretty special! Physics, econometrics, abstract math, statistics - they force you to think About numbers. The rest is thinking With numbers.
During covid politicians bragged about covid attributed deaths, while public health experts were discussing all cause mortality.
This is the case everywhere. Quality metrics are absolutely out there - you just have to give enough of a shit to look at them.
And no one who uses them seriously doesn’t understand their weaknesses. At a macro level all signals have flaws, knowing what they are and how to deal with them is the whole job of many people.
You can find huge swaths of research comparing and contrasting the ADP number vs the official bls stat but no one serious thinks ADP is _better_ than the the headline unemployment number because it can’t be gamed.
Econometrics is a political loser; culture wars and other qualitative arguments decide elections. When politicians do bring out numbers, they cherry pick dramatic examples like the price of eggs, not meaningful stuff like CPI or GDP.
“”Unemployment is another gamed metric. If you want to get a sense of unemployment, a graph of % employed tells you more than some gamed number like "unemployment" since "unemployment" is a direct measure of political success.””
Even in this case, you may have to normalize to the population pyramid that is inverting because the age is shifting to much older than prior.
Macro metrics are marketing tools largely.
In Australia we had a long period of "Lower Taxes" Vs "Lower Taxes (As a proportion of GDP)" The issue being that the latter didnt actually lower taxes, they just spent more money, increasing GDP.
These metrics are helpful sometimes in review. But in terms of targets they suck.
The point of subtracting imports is so that it doesn't count as domestic production, and effectively zeros out the portion of C + G + I that was not produced domestically, but thats independent of how much is in exports.
But you can’t change the process mid way through your measurement. We don’t have a way of measuring “consumption of domestic products” so we just measure consumption and subtract the imports afterwards.
X-M is an accounting trick, but when you’re using this model you have to stick with it.
The idea that imports were deferred causes this accounting trick to show its weakness. (Presumably, looking at the data for all of 2025 when it’s available will “low pass” the deferred imports)
Let's try a very simple example of buying all our inventory in one quarter and selling it in another - what is supposedly behind our GDP woes.
Let's say in Q1, the only spending was on $1 trillion of imports into private inventories, thus: I=$1 trillion, C=$0, G=$0, X=$0, M=$1 trillion. That gives us a GDP of $0.
Next quarter, flush with product there's no need to import anymore and the entire inventory is somehow sold domestically, thus: I=-$1 trillion, C=$1 trillion, G=$0, X=$0, M=$0. That gives us again, a GDP of $0.
Yet articles claim that the GDP in Q2 would be higher due to the drop in imports and was reduced in Q1 due to an increase in imports.
So Q1 is $-1 trillion and Q2 is $1 trillion?
IIRC, Investment is more of I bought machinery to make socks not I have 100 nintendo switches.
That's why in my example Q2 investment goes negative since inventories get depleted when they are sold.
damn, my clothes are heavy, because I know how much I weigh.
Imports don't actually subtract from GDP. They are subtracted inside the GDP formula to make sure they aren't counted toward the country's production, basically.
Logically it makes sense: If you import something, it was not produced within the country. Therefore you need to make sure it's not counted in GDP. However, the starting values for GDP calculation are sum total type numbers, so you have to manually subtract out imports.
This proves endlessly confusing for journalists and even politicians who see the subtraction sign and conclude that "imports subtract from GDP"
The key part is that nobody should care about any values or ratios in isolation or impute causality that isn't there. Otherwise people start believing that doing crazy stuff to shrink a trade deficit results in higher GDP, as opposed to lower C+I+G. And when those people are sufficiently stubborn and sufficiently powerful, you get $economy shrank 0.5% in the first quarter headlines...
This is companies stocking up, and the items are in inventory. They will sell it over the next quarter or so, at which point the tariffs will really weigh.
I also personally did that for expensive gear I was otherwise planning on waiting on. And now I'm not going to be buying that over the next 2-5 years like I was originally planning.
It's a big bolus of spending that will not be replicated in the future.
Last week I was looking at a proposal from a supplier that's got a ~8K "tariff" line on it and thinking... y'know, I can wait on that project.
https://www.noahpinion.blog/p/why-do-econ-journalists-keep-m...
Source: am economist, and the writer of the blog is 100% correct.
Reporting and commentary on GDP and economics stats is just generally bad.
Trade deficits are exports of money as static savings, and that reduces money in flow within the USD currency area. Deliberately, as that is how neo-mercantalism operates. The impact is on the income/expenditure sequence, not the aggregate figures - which are massaged by the reporting currency effect.
Imports are subtracted from the GDP calculation, BUT, that's only because they're added in the equation as well as part of consumption/investment/government spending. So to capture only the domestic production, since it's hard to measure consumption/investment/government spending only on domestic inputs, you just measure them overall, add exports, and subtract imports.
So people see that in the equation imports are literally subtracted as a variable, and reason that if imports go up $X, that means GDP literally goes down by that amount. In reality — ignoring for a moment that we sometimes mismeasure consumption/investment/government spending, the net effect in the equation is 0.
ON THE OTHER HAND, in one way part of the GDP drop here is because of imports. It's not something you can cleanly calculate the way journalists often try to, because there's a lot we don't know, but picture this simplified example:
I'm a factory owner, and my factory uses a lot of inputs that we import from China. We normally spend $50k/quarter on investment (maintenance, new machines, etc.). But next quarter my short-term cost of Chinese inputs may double. It may make sense for me to front-load imports ahead of tariffs and defer as much investment as possible. I can't do that forever, so eventually the money will show up in the equation more-or-less where it would have otherwise.
And on top of that, there are a bunch of confounding factors. Over time, imports also make domestic production more efficient, so shifting to less-efficient US inputs (or simply paying the tariff) will slow the rate of overall growth. And some costs are passed on as higher prices, which reduces demand, and therefore reduces growth. And importing goods also means exporting dollars, which affects exchange rates, and therefore affects exports as well. It's all interconnected.
Calling it out when they reason from an accounting identity is really important, because it's a lot of what drives the misconceptions of Trump's protectionist advisors — they use the same reasoning in reverse to say that anything that reduces the trade deficit therefore increases GDP. But that's only true in an accounting sense! Reality takes more complex modeling, and has to account for all the interconnected pieces.
As you point out, there's no purchase level data about what's imported vs. not.
The way this is handled is that this quarter's imports are set against this quarter's consumption - basically the method assumes the import/domestic mix of business inventories stays the same (true enough in the long run, very incorrect in short term shocks).
That's why extremely disingenuously the AP says:
>Trade deficits reduce GDP. But that’s just a matter of mathematics. GDP is supposed to count only what’s produced domestically, not stuff that comes in from abroad. So imports — which show up in the GDP report as consumer spending or business investment — have to be subtracted out to keep them from artificially inflating domestic production.
Answer: What happened here[1] is that the BLS makes a bunch of assumptions to get data out in time (preliminary figures based on historical seasonal trends, etc.) but this quarter, their assumptions about consumer spend were far too aggressive.
It happens all the time, especially in strange times like 1Q was, but there's also career/political incentive to be aggressive on the advanced data, since that's what drives the big headlines.
[1]https://www.bea.gov/system/files/gdp1q25-3rd-chart-02.png
Now Republicans are actively trying to denaturalize people so they can be deported. I have no idea how successful that will actually be but the fact that there's an active attempt for it is enough to trigger anxiety for me.
If this is how they're treating naturalized citizens, I certainly cannot blame people for not visiting the US on a tourist visa; who the fuck knows what would happen to them? They're detaining tourists for bald JD Vance memes [1], I would stay the hell away from America and spend my vacation money elsewhere.
It really depresses me. I love the US. I was born here. I live here. Much as I love visiting Europe, I haven't really wanted to live anywhere else than the US, but I fear that this active hostility towards our foreign trading partners might cause permanent and irreparable damage. For the first time in my life, I have seriously started to consider moving me and my wife to a different country, which I hope I don't have to do but I am genuinely scared that they're going to detain my Mexican-immigrant wife.
[1] I know that CBP is denying that it was because of a meme, but instead because of drug use, but in this particular case, legitimacy doesn't matter. If it's believable that I could be detained in a country because I texted a meme to my friends, there's absolutely no way in hell I am visiting that country.
Not sure how much it would help if shit hits the fan but it’s sort of surreal regardless.
Also, he's a fucking politician. The country shouldn't be run the same way as KiwiFarms.
One thing I have my eye on is how hard consumer habits are to change. For example, American alcohol is simply gone from store shelves in Ontario. I can only imagine how much marketing work went up in the wind now that consumers have adapted. Returning the product to the market is probably not even the hard part.
There's a growing body of holiday makers with neither a criminal record nor evidence of carrying a banned substance, who have been turned away from the USA for nothing more than the vibes of the CBP. In some cases these people were strip searched and thrown into federal prison without any kind of evidence and no wrongdoing whatsoever.
An informed person would be right in holidaying elsewhere, otherwise it's a gamble if they will lose the money paid for their holiday and flights.
On avoiding business with the USA: The tariffs and their mercurial changes create a type of instability where a USA-based vendor, at random, may no longer be able to fulfil their contract. It's incredibly damaging for our American partners.
> For the first time in my life, I have seriously started to consider moving me and my wife to a different country, which I hope I don't have to do but I am genuinely scared that they're going to detain my Mexican-immigrant wife.
I know I sound like an armchair economist, which is probably why I am on here ranting instead of on a tropical beach with super models name Brooke and Tiffany, eating lobster and beluga caviar, washing it all down with fine champagne.
I can only assume that the last 5 years have been so solid for the economy that we have a long way down to go before we even begin to feel pain.
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
So technically, we can say “Q2 is over” on Tuesday, but we won’t be able to declare a recession (or not) until that data comes out. Unless you're inside the Fed or BEA models, we're all just speculating until then.
The advance estimate drops on July 22 from the BEA.
US is in a slight slowdown though
Additional obvious effect of tariffs is introducing friction, to say the least, into supply chains, similar to how pandemics did at the beginning with about the same result - inflation and loss of productivity.
I personally have no panic here though - during my quarter of century here i noticed that US economy is extremely resilient and can take a lot of hits and damage, can even get knocked down, yet nothing can get it knocked out, and it would always come back even more roaring. It is though very hard on those who gets the sharp end of stick here, i'd wish that the society would get a bit more empathetic to them.
that isn't possible for any production other than a primitive one. The modern production is very complicated, and in particular contains long lists of components, materials, tools, technological stages of production and engineering services. I.e. it is a pyramid with very wide base. Even large country like US is too small to maintain all what is required for any even moderately complicated product. Tariffs are kind of shrinking the pyramid's base - the result is lower pyramid so to speak.
Of course, you and anybody welcome to bring counter-examples.
>This would, in theory, also increase domestic consumption
It would increase prices, and decrease productivity thus resulting in lower consumption.
You can encourage the whole thing to move but it needs to be a carefully considered long-term plan with strategic investments and ongoing investment. That’s the opposite of what we’re seeing now with tariffs changing every time an octogenarian gets cranky, and his party is trying to slash investments rather than grow them. No business is going to assume that any promise made will last for a business quarter, much less the years needed, and without some major funding commitments nobody is going to jump to line up tens of billions in financing.
similar like with networks the value of supply chain grows with its size, ie. more competing suppliers decrease the prices and increase the productivity and efficiency. It also lowers the risks of failing suppliers, and the supply risk is also an additional cost.
So, you suggest to rebuild supply chain hosted by the "technologically civilized" half+ of the world, i.e. by 4B+ of people, in a country of 340M. I.e. a supply chain at least 10x smaller, with at least 10x less competition (or the alternative - same number of suppliers 10x smaller in size). We all know what happens when there is 10x less competition. (and the alternative is even worse - the suppliers being 10x smaller in size is a loss of manufacturing efficiency which comes and goes with the scale of mass production and probably isn't possible at all as small suppliers usually quickly fail and/or scooped by larger ones, especially given that their addressable market is also 10x smaller)
The person you are replying to said no such thing.
Yes, of course, in isolation, some manufacturers can build new factories. Not overnight. Not in a year, if the supply chain is remotely complicated.
Okay, lets say Dell, who moved their manufacturing out of the US nearly two decades ago, succeeds with their factory building and starts building here. Great! What are they building? Are they fabbing 100% of the components that are going into these computers they are building? Absolutely not.
they said: >that isn't possible for any production other than a primitive one.
What I find bizarre in this discussion is the refusal to even acknowledge that there are other economic effects at play besides the first order effect of tariffs increasing the cost of imports. A second order effect is to make building things domestically relatively cheaper, all other things being equal, because those things won't be subject to the tariff. Will the net effect be positive or negative? Who knows. But people refusing to even acknowledge that there are effects that cut both ways tells me that they are dishonest or stupid and you probably can't have much of a conversation with them.
There's no existential threat compelling enough to shut down trade for the generation or two it would take to see real benefits, and those benefits could be realized within the same time frame through other means.
This turns conversation around positive effects into a thought experiment people might not find germane to a current discussion. The tariffs simply won't be in place long enough.
that is just opposite of reality. Several people explained that to you here, yet you state :
>But people refusing to even acknowledge that there are effects that cut both ways tells me that they are dishonest or stupid and you probably can't have much of a conversation with them.
People brought you a ton of arguments, yet you haven't addressed any of them, haven't produced any counter-example, and instead shouted that bizarre statement.
Even in the 90s, major components were made in Taiwan and Japan. And since that time, the US ability to make what we did previously has atrophied
What do we really get out of Dell moving PC manufacturing to the US if every single part they consume was manufactured in China or Taiwan? Final assembly is the lowest value part of the equation. Apple already did this shell game with the Mac Pro a few years ago and it didn't last long nor did it have a meaningful impact on anything other than the price of the product
Because GDP is a meaningful quality of life indicator.
[1] https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?location...
Polymarket puts 30% chance on a recession.
It's been around for a while now, are there any 3rd party reliable studies showing how good polymarket markets are at predicting events?
There was one investor from France I believe who bet heavily on Trump winning almost $28M. After election it was revealed he had some private polling done, which informed his decision.
It doesn't answer the question you posed, but I believe these markets could highlight some inefficiencies that conventional mainstream information cannot capture.