US officials, in their efforts to calculate GDP are falling further behind in measuring rapidly evolving technology, especially smartphones that provide essentially-free digital products such as Google Maps and Snapchat, according to a Goldman Sachs analysis.
Mismeasurement understates the annual pace of inflation-adjusted GDP growth by around 1 percentage point, compared with 0.5 point in Y 2005 and 0.3 point in Y 1995, according to a report Monday.
The Goldman economist based the assessment on GDP tallies across 4 categories: Unmeasured nominal output, free and crowd-sourced digital products, consumer inflation, and business investment in information and communication technology.
“This is somewhat larger than our previous estimates and would imply that roughly half of the post-crisis productivity slowdown is explained by greater mismeasurement,” he wrote in a report. He cautioned that the uncertainty around the estimates is large, particularly with respect to digital goods and healthcare consumer inflation.
The latest Goldman report follows recent research on the challenge of measuring how well GDP, the broadest measure of the output of all goods and services, reflects fast-changing digital offerings.
The report cited a June working paper by David Byrne of the Federal Reserve Board and Carol Corrado of the Conference Board, who estimate that innovations in consumer content delivery contributed more than 0.5 percentage point to GDP growth during the last 10 years.
Goldman’s estimated in the new report that smartphones alone represent between $100 to $225-B of missing real consumption.
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