Get ready for some good news this week — about $480 billion worth of good news.
That’s how much U.S. gross domestic product, the country’s economic output, will grow by. At least on paper.
The Commerce Department, which is tasked with tallying up GDP, will revise the statistic on Tuesday to include private companies’ spending on research and design as investment rather than merely expense. It will also reclassify works of art such as films, music, and books as long-lived assets, further boosting measured GDP. The Commerce Department will change the GDP figures going back all the way to 1929. The effect will be to add about 3 percent to 2010 GDP, according to the Bureau of Economic Analysis’ economists, or roughly $480 billion.
Of course, Americans won’t be or feel richer than they were before. But the government is always fine-tuning the official statistics to better capture reality (not that it always succeeds). This latest revision to GDP is a reminder that consumers may be gaining even without accruing physical objects, and that intangible goods and services are just as real as ones that can be touched.
There’s more happening this week in economics than just revisions to old statistics, of course.
On Tuesday, Federal Reserve officials will gather in D.C. for a two-day meeting. On Wednesday, the Fed’s monetary policy committee will release its monetary decision.
Wednesday’s decision is thought to be the calm before the storm: no economists polled by Bloomberg News thought that the Fed would begin the “taper” — decreasing the size of its monthly stimulus bond purchases — at this meeting. Half, however, predicted that it would come at the Fed’s next meeting, in September.
Not that there won’t be anything to watch for on Wednesday. The Wall Street Journal’s Jon Hilsenrath writes that chairman Ben Bernanke and company could sharpen the central bank’s message on the plan for short-term interest rates. Currently, the “forward guidance” — Fed-speak for the stated plan — is to keep rates near zero until after gradually phasing out the bond purchases and then until unemployment dips below 6.5 percent, which the Fed anticipates will be in 2015.
Hilsenrath explains that Fed officials could add detail to those plans with Wednesday’s announcement. In particular, they might decide to stipulate that rates will not rise if inflation is below a certain level, such as 1.5 percent (inflation was just 1.2 percent in May by the Fed’s preferred measure).
And, of course, investors will scrutinize the Fed’s statement for any hints about the timing of the taper.
On Tuesday morning, the Senate Banking Committee will convene for hearings on systemic risk on Wall Street. Securities and Exchange Commission Chair Mary Jo White and Commodities Futures Trading Commission Chairman Gary Gensler, two top regulators, will testify about reforms of derivatives, money market mutual funds, credit rating agencies, and the Volcker Rule, according to the committee.
On Wednesday, the House Budget Committee, under chairman Paul Ryan of Wisconsin, will hold a “Progress Report on the War on Poverty.” Ryan has been studying up on policies related to poverty, a development worth watching for those interested in the GOP’s attitudes toward welfare and poverty.
This week will also see a slew of economic data. The Case-Schiller housing price index and the Conference Board’s consumer sentiment index are out Tuesday morning. The Commerce Department’s GDP report is Wednesday morning. Growth is expected to have slowed to 1.1 percent in the second quarter, from 1.8 the quarter before. On Friday, the Bureau of Economic Analysis will release data on personal income and outlays for June.
Last, but certainly not least, the July jobs report comes out Friday morning, as Congress is preparing to leave town for August recess. After 195,000 jobs added in June, economists expect a gain of 175,000 in June, with the unemployment rate ticking down a notch to 7.5 percent.