Cleveland Fed Analysis Looks at Discrepancies in Economic Output Measures, and What to Do About Those Discrepancies

The recent data revision that significantly closed the gap between the two main measures of economic output in the United States – gross domestic product (GDP) and gross domestic income (GDI) – was an exception rather than the rule, according to new research from the Cleveland Fed.

In a new Economic Commentary, senior research economist Kurt Lunsford finds that the revision that closed the GDP-GDI gap from 3.4 percent to 1.1 percent in the first quarter of 2022 does not represent the typical historical revision. Historically, data revisions do not shrink the size of the GDP-GDI gap on average. As such, policymakers would do better to use measures that combine and average GDP and GDI in formulating their economic outlooks and making policy decisions.

“My finding that the size of the discrepancy does not shrink with revisions indicates that GDP and GDI are not expected to eventually agree about the level of economic output,” Lunsford writes. “Given this feature of the data, combined estimates of GDP and GDI that are publicly available could be especially useful.”

Read the Economic Commentary: The Discrepancy Between Expenditure- and Income-Side Estimates of US Output (clevelandfed.org)

For information on combined estimates of GDP and GDI, see: Reconciled Estimates of Monthly GDP in the US (clevelandfed.org), and https://drive.google.com/file/d/10f7N8BI9Fs68cgZVp3_cwhTq8XkhkhnK/view?usp=sharing.

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892