Intangible in latest 2Q GDP estimate

Last month I reported that the second estimate to the 2nd quarter GDP substantial revised the growth in “intellectual products.” This new category of business investment includes research and development; entertainment, literary, and artistic originals; and software. The first (advanced) estimates showed business investment in this subset of intangible assets growing in the 2Q by a healthy 3.8%. In the second estimate, these investments were revised to show a decline by 0.9%. According to today’s third estimate data from BEA, the decline in intellectual property investments was actually slightly higher at 1.5%. That compares to an increase of 3.7% in the 1Q. Note that the overall growth rate for GDP remained at 2.5% in the third estimate.
Since this third estimate is based on more complete data, it is unlikely to be substantially revised in the future – although that could happen. The size of the revision between the first and second estimates continue to be worrisome. We will see in the next two months when the first (advanced) and second estimates for 3Q GDP come out. A large revision would indicate the difficulty of getting data on these investments in a timely fashion (at least quickly enough for the first estimate). If that is the case, BEA will need to work on making that first (advanced) estimate more accurate if it is to continue to be a useful measure.

IPP percent.png

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