It just gets better and more outrageous ... savings is up, because spending is down, since the original story line didn't work so well
chicagotribune.com
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Calculation error overstates consumer spending in May
From Tribune news services
July 6, 2001
WASHINGTON -- Commerce Department economists made a math error that overstated the amount of consumer spending in May, officials said Thursday.
Consumer spending, a key force keeping the economy afloat, rose by 0.3 percent in May--not by the 0.5 percent the government reported Monday. The initial report, which put the increase at 0.5 percent for the second month in a row, helped buoy hopes that the sluggish economy is poised for a turnaround.
A release by the Commerce Department's Bureau of Economic Analysis, which compiles the monthly consumer spending and income reports, said the math error caused the spending figures to be overstated by $12.3 billion in May. Adjusted for inflation, consumer spending rose 0.2 percent in May, the department said, not the 0.3 percent originally reported.
"The error was in [personal consumption expenditures] goods, specifically, estimates of consumer purchases of light trucks," the department said in a release.
Private economists said the error is significant, given that consumer spending accounts for two-thirds of all economic activity. The initial data had led some to revise up their estimates of economic growth for the second quarter.
But several said Thursday that they thought the corrected figure was more in line with previous estimates that the economy barely grew in the recently ended April-June quarter.
"The number is more consistent with other data we have seen on consumer spending for May, including auto sales," said Lynn Reaser, chief economist for Banc of America Capital Management. "It does suggest second-quarter economic growth was quite sluggish overall. But we already knew that. It probably doesn't change the outlook for the second half of the year."
Steve Landefeld, director of the Commerce Department's Bureau of Economic Analysis, said the mistake was brought to the bureau's attention by a Federal Reserve economist, who questioned the spending figures.
The bureau said the $12.3 billion overstatement came entirely from miscalculating spending on light trucks, he said. As a result, spending on durable goods, such as cars, actually declined by 0.3 percent in May, rather than rose by 1.2 percent.
The mistake didn't affect the calculation of Americans' incomes in May, which rose by 0.2 percent.
Given that consumer spending didn't outpace income growth by as much as the government initially reported, the corrected spending figure did lead to an improvement in the nation's personal savings rate. The rate of savings as a percentage of after-tax income in May was a negative 1.1 percent, versus the negative 1.3 percent originally reported.
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