Changes in Inventories – Effect on GDP Data
A component of private domestic investment – changes in
inventories – has become more consequential in recent quarters:
Data Revisions Matter
A timely piece from Bloomberg [a must read for financial
market participants]:
“If you want to know how the economy is doing, trust an
expert rather than the financial markets, says a team led by Paul Donovan, UBS
Ltd.'s managing director of global economics.
That might sound a bit self-serving coming from someone
in the profession, but let's hear him out:
Financial markets place an immense amount of weight on
economic data, but far less to their more accurate revisions. In other words,
markets take the strongest signal from releases that are most likely to be
noise. Compare those initial-release data with economists' educated guesses,
and the latter wins out.”