Rand sinks R11.2833 to the dollar

[Generix]

This is not correct. Products manufactured in China by US companies does not form part of the US GDP.

I would love to see your sources.

I agree - of course it doesn't, which is why it shouldn't be calculated as such.

I hope the link works. If not, you may google 'Susan Houseman offshoring GDP' and the link will come up among several others.

businessweek.com/magazine/content/07_25/

The underlying problem is located in an obscure statistic: the import price data published monthly by the Bureau of Labor Statistics (BLS). Because of it, many of the cost cuts and product innovations being made overseas by global companies and foreign suppliers aren't being counted properly. And that spells trouble because, surprisingly, the government uses the erroneous import price data directly and indirectly as part of its calculation for many other major economic statistics, including productivity, the output of the manufacturing sector, and real gross domestic product (GDP), which is supposed to be the inflation-adjusted value of all the goods and services produced inside the U.S. (For a detailed explanation of how import price data are calculated and why the methodology is suspect, see page 34.)

The result? BusinessWeek's analysis of the import price data reveals offshoring to low-cost countries is in fact creating "phantom GDP"--reported gains in GDP that don't correspond to any actual domestic production.

 

[BBSA]

I agree - of course it doesn't, which is why it shouldn't be calculated as such..

I was referring to your statement which was incorrect.

I hope the link works. If not, you may google 'Susan Houseman offshoring GDP' and the link will come up among several others.

If you read careful you will see it is just a price measurement problem. The import price data do not reflect the full cost saving when foreign suppliers are substituted for domestic suppliers. No all offshore manufacturing is counted as GDP as you were claiming. It is a big differences.

Here is an explanation from the BEA

This is a manifestation of an old and difficult problem in price measurement. The argument fails to recognize that an offset occurs when domestic goods and services are purchased in the United States. That is, if real imports are understated because shifts to foreign suppliers are not being adequately captured in the price data, it is also likely that domestic production is understated because of shifts to more efficient domestic suppliers. Furthermore, BEA uses chain-type measures that are designed to account for much of this substitution. Any remaining measurement errors should be offsetting because researchers have not demonstrated that errors in measuring imports are larger than offsetting errors in measuring domestic production.

There is no clear “fix” for the price measurement problem beyond the adoption of chained-dollar estimates to measure real GDP, which BEA adopted in 1996. Nominal, or current-dollar, GDP is not affected because the amount deducted from nominal GDP for imports represents the actual amount spent for imports. Further, there are no distortions in the nominal trade balance, or other nominal measures, such as corporate profits and wages and salaries.

So it seems that GDP calculation is not really effected.

 

[Generix]

If you read careful you will see it is just a price measurement problem. The import price data do not reflect the full cost saving when foreign suppliers are substituted for domestic suppliers. *No all offshore manufacturing is counted as GDP* as you were claiming. It is a big differences.

Yes, I should have said offshore productivity gains. But ...

Here is an explanation from the BEA

Quote:
This is a manifestation of an old and difficult problem in price measurement. The argument fails to recognize that an offset occurs when domestic goods and services are purchased in the United States. That is, if real imports are understated because shifts to foreign suppliers are not being adequately captured in the price data, *it is also likely that domestic production is understated because of shifts to more efficient domestic suppliers*. Furthermore, BEA uses chain-type measures that are designed to account for much of this substitution. Any remaining measurement errors should be offsetting because researchers have not demonstrated that errors in measuring imports are larger than offsetting errors in measuring domestic production.

There is no clear “fix” for the price measurement problem beyond the adoption of chained-dollar estimates to measure real GDP, which BEA adopted in 1996. Nominal, or current-dollar, GDP is not affected because the amount deducted from nominal GDP for imports represents the actual amount spent for imports. Further, there are no distortions in the nominal trade balance, or other nominal measures, such as corporate profits and wages and salaries.

So it seems that GDP calculation is not really effected.

... ah, those damn stats! Your source above (US dept of commerce's bureau of economic analysis) counters the original research that showed BEA does not discount offshore production gains when it calculates GDP, with the argument that such gains are 'likely' offset by another set of figures, which it also cannot quantify. Note that the BEA admits it doesn't know whether or to which degree real imports are understated. But, it says, if they are ... big deal! ... there must be offsets somewhere in its pile of figures. By crunching arbitrary numbers it comes up with a sort-of calculation of real GDP. Very dodgy. Which is why one shouldn't get too excited about GDP rankings.

BTW, 'expatiation' was a very descriptive word for the ramblings of the BEA. Much better than 'explanation'!

About your claim that GDP calculations are seemingly not materially affected: some US economists and commentators are not that sanguine.

http://www.onlinejournal.com/artman/publish/article_2099.shtml

Economist Matthew J. Slaughter, a proponent of offshoring, says: “There are potentially big implications. I worry about how pervasive this is.” Business Week says the implications are big. The cover story estimates that 40 percnet of the gain in US manufacturing output since 2003 is phantom GDP.

Most likely that estimate is low. Consider, for example, that furniture imports have doubled in the past few years (offshored production counts as imports) while US jobs in furniture manufacture have declined 21%. US statistics, however, show that US output and productivity rose even as US manufacturers closed their plants and no new investment went into the industry.

Go figure, as they say in the States.

 

[BBSA]

Yes, I should have said offshore productivity gains.

Yes, you should have. Thanks for admitting your mistake.

 

[Generix]

Yes, you should have. Thanks for admitting your mistake.

No sweat! Maybe the guys at the BEA should just admit theirs too

Do you have any thoughts on the anomaly pointed out in the previous post?:

The cover story estimates that 40 percnet of the gain in US manufacturing output since 2003 is phantom GDP.

Most likely that estimate is low. Consider, for example, that furniture imports have doubled in the past few years (offshored production counts as imports) while US jobs in furniture manufacture have declined 21%. US statistics, however, show that US output and productivity rose even as US manufacturers closed their plants and no new investment went into the industry.

 

[BBSA]

Do you have any thoughts on the anomaly pointed out in the previous post?:

How much is the supposed anomaly in dollar terms?

 

[Generix]

How much is the supposed anomaly in dollar terms?

Try as I might, I just couldn't get any info out of the BEA. Apparently they don't have a clue because they just don't account for that sort of thing in their GDP stats.

But I'm fairly confident that, if he really wanted to know, an intrepid researcher could trawl through the stats for growth in US manufacturing output since 2003, add up all the figures and calculate what 40% will come to. That should give you a pretty good idea of the dollar value of the lowest estimate for phantom GDP.

 

[BBSA]

Try as I might, I just couldn't get any info out of the BEA. Apparently they don't have a clue because they just don't account for that sort of thing in their GDP stats.

But I'm fairly confident that, if he really wanted to know, an intrepid researcher could trawl through the stats for growth in US manufacturing output since 2003, add up all the figures and calculate what 40% will come to. That should give you a pretty good idea of the dollar value of the lowest estimate for phantom GDP.

Surly if the figure was material somebody would have calculate it.

Seems like a storm in a teacup.

 

[Generix]

Surly if the figure was material somebody would have calculate it.

Seems like a storm in a teacup.

Compared to the current tornado in that economy, it probably is. I do suspect, though, that GDP rankings - for what they are worth - will look materially different in the not-too-distant future.