Seasonal adjustments to the gross domestic product data, some have recently suggested, may not be sufficient to give a true read of the economy, however, the inadequacies are unlikely to cause policymakers consternation or harm monetary policy, according to a Federal Reserve Bank of San Francisco
"Much recent discussion has suggested that the official real GDP data are inadequately adjusted for recurring seasonal fluctuations. A similar pattern of insufficient seasonal adjustment also affects the published data for a key measure of price inflation," the Economic Letter authors Glenn D. Rudebusch, director of research and executive vice president in the bank's Economic Research Department, Daniel J. Wilson, a research advisor in the department, and research associate Benjamin Pyle. "Still, such residual seasonality in the published output and inflation statistics is unlikely to mislead Federal Reserve policymakers or adversely affect the setting of monetary policy."
By applying another seasonal adjustment to the published data, the authors estimate "inflation was lower and economic growth was faster during the first half of this year than currently reported in the published data."
Since policymakers know that any individual data item, "even a comprehensive measure like GDP," can be inaccurate, "they are unlikely to be misled by the transitory statistical noise arising from residual seasonality."
