The Commerce Department will no longer calculate a "flash" estimate of the gross national product just before each calendar quarter ends, Commerce Secretary Malcolm Baldrige announced yesterday.
"Commerce analysis shows that this number is of little value to the department, and, because it necessarily is based on incomplete data, can be misleading," Baldrige said in a statement.
The department's bureau of economic analysis (BEA) has been calculating the flash figure for more than 10 years as an early indication of how the economy has done in the quarter about to end. The estimate has been circulated within the department and given to a few other officials, such as the chairman of the president's Council of Economic Advisers.
Two years ago, following several quarters in which the unpublished number leaked out, Baldrige decided to make it available officially. At the time, the BEA officials who prepared the estimate opposed the move on the grounds that the figure was based on such incomplete data for the quarter that it was little more than a very well-informed guess.
In his statement yesterday, Baldrige underscored this point. "At the time the 'flash' is released, estimates have to be used for two months of the quarter for business fixed investments, inventories and the consumer price index. The merchandise trade balance must be estimated for the entire quarter," he said.
"This makes the 'flash' an educated guess at best, yet in financial circles it is still considered an actual statistic in spite of Commerce's cautions issued along with the quarterly release of the figure," the secretary continued.
"In our review of Commerce paperwork, we feel we can save the taxpayers money and improve accuracy by halting the compilation of the flash forecast where we were a long way from perfect. Instead, our first report will be the preliminary GNP data released in the third week following the end of the quarter, the same schedule we have had in the past," he said.
A Commerce spokesman said there would be no jobs lost as a result of the change. Instead, the economists and statisticians who have worked on the flash calculation would have more time to do a better job on the regular GNP estimates and revisions, he said.
One reason that BEA officials were wary of the flash is that it has been subject to very large revisions, which also have tended to be upward more often than downward.
In what turned out to be the last flash figure calculated, BEA reported on Dec. 20 that current-dollar GNP was rising at a 5.9 percent annual rate in the fourth quarter. After adjustment for inflation, the rate was put at 3.2 percent.
Last week, the preliminary estimate for fourth-quarter current-dollar GNP put the increase at a slightly smaller 5.8 percent rate. However, because of an upward revision in the inflation rate for the quarter, the rate of increase in real GNP was lowered to 2.4 percent.
The preliminary estimate, which henceforth will be the first figure published for a quarter, is itself based on "preliminary and incomplete source data," the BEA release said last week.