US economy grows faster than expected, while data tweaks rewrite history

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The headline figure for US gross domestic product in the second quarter was a better than expected, clocking in at 1.7%, according to the first of three estimates. But the first-quarter figure was revised down to 1.1%, from 1.8%. So all in all, the economy is still chugging forward at about the same pace.


Meanwhile, today’s GDP release was also a rewrite of the economic past. The Bureau of Economic Analysis retroactively changed, among other things, the way that research and development is counted in the report. The short version: R&D will now be treated as something akin to business investment, rather than a cost for end products. The rationale is that R&D is more like capital expenditure, which can generate revenues over long time frames, rather than a one-time cost.

While wonky, those changes are important. Today’s update on the treatment of investment in GDP accounting helped boost the size of the US economy by $558.9 billion last year. And by boosting the size of the denominator in that pesky debt-to-GDP equation, the FT notes that today’s data tweak pushed the US debt burden down overnight. Last year’s publicly traded debt outstanding as a share of GDP is now less than 70% (paywall).