A bad GDP revision that's actually good
So today they released a revised GDP growth rate for the Spring quarter that was 1.3%, down from an initial estimate of 1.7%. The revision was blamed mainly on the heat/drought that devastated crop production in the Midwest. Now, that crop devastation was bad news for the world as a whole, but I'm not so sure it was bad for the narrow interests of the US. We're the world's largest exporter of staple food commodities, and commodity prices went up a whole lot as a result of the losses. Further, those higher crop prices will stick around at least until next year, boosting farm incomes considerably. So, ironically, the U.S. is probably better off as a result of a bad harvest. Real GDP doesn't reflect the price benefit of exports because real GDP holds prices fixed at a baseline level, so it just measures the physical losses of the crop. This is quite unusual, I think, for a downward revision of this magnitude to actually be a good thing. But let me emphasize again: