There were some particularly bad data used in today's GDP number by the Bureau of Economic Analysis (BEA).
The Chain Deflator intends to represent inflationary growth in the economy.
Unlike some price indexes, the GDP deflator is not based on a fixed basket of goods and services. The basket is allowed to change with people's consumption and investment patterns. Specifically, for GDP, the "basket" in each year is the set of all goods that were produced domestically, weighted by the market value of the total consumption of each good. Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices. The advantage of this approach is that the GDP deflator reflects up to date expenditure patterns.
In practice, the difference between the deflator and a price index like the CPI is often relatively small. On the other hand, with governments in developed countries increasingly utilizing price indexes for everything from fiscal and monetary planning to payments to social program recipients, the even small differences between inflation measures can shift budget revenues and expenses by millions or billions of dollars.
Here is the formula used to calculate it.
The whole concept of the GDP Deflator is to give us a picture of the REAL growth in the economy, hence the term REAL GDP, absent the effects of monetary inflation.
Understating inflation has a significant effect on the growth of 'real GDP.'
Let's repeat that.
Using a lower than an honest approximation of inflation in the economy has a significant effect in the estimated growth of GDP.
Today's GDP Deflator came in at a lower than expected 2.6% as compared to expectations of 3%.
So, if you believe that inflation is running at a rate higher than 2.6% then we would be looking at a real GDP growth that was effectively flat to negative, depending on what number you would like to use as more reasonable.
You are not crazy. You are being lied to and deceived, systematically, by the government. They have a HUGE incentive to misrepresent inflation, because it allows them to save many billions of dollars in payments to older and disabled americans, soldiers and veterans, and even in its interest payments.
There will be more information coming out on this as the weeks go by, but we thought you would at least like to see some of the major moves behind the scenes in this government puppet show.
The US economy is in recession. Inflation is north of 3% and possibly a LOT higher, almost double digits.
Here is a little more information about the US governments deceptive use of economic statistics at John William's Shadow Government Statistics
