GDP – fooled by seasonality

I was not going to comment the flash estimate of GDP for Romania. But something seemed odd about it. As you know by now the economy grew in real terms by 0.2% in Q2 2011 relative to Q1 2011. And it grew by 1.4% relative to the same period of 2010, but series is not seasonal adjusted. Taking out the seasonal effect you get a growth rate of 0.3% in Q2 2011 relative to Q2 2010.
This is what caught my attention – the big difference between adjusted and unadjusted GDP. It shows how important agriculture, holiday period, weather, costs with heating or cooling etc are for this economy. \
As I said before forecasting in such an economy it is almost impossible.

However, what one can do is to take into account these differences when deciding on fiscal and monetary policies. NBR has more or less acknowledged this and now claims to focus on CORE2 measure of inflation – adjusted for volatile prices. The government should do the same when trying to estimate revenues and expenditures. When it comes to GDP estimates “the trend is the only friend”.


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