Economist Roubini: Was Q3 GDP manipulated upwards because of elections?

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http://www.rgemonitor.com/blog/roubini/154588

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This mismeasurement of motor vehicle production in Q3 is highly suspicious coming about ten days before the US mid-term elections. It is also highly suspicious as it is not clear how the Bureau of Economic Analysis (BEA) at the Department of Commerce could have made such a gross mistake when seeing an alleged 26% increase in auto production that was patently at odds with many facts. During Q3 all the major US automakers - Ford, GM, Chrysler - announced production cuts for both Q3 and Q4. So, how could the folks at BEA argue and estimate that production went up by a whopping 26%? These data also do not make any sense as the Federal Reserve Board data on automotive production in Q3 show a sharp fall in production of motor vehicles of 12% (see http://www.federalreserve.gov/releases/g17/Current/g17.pdf, Table 1).

So how come the FRB data show a -12.0% sharp drop in production while the BEA estimates show an incredible 26% increase in production in Q3? This is altogether fishy. If one wants to give the benefit of the doubt to the usually non-partisan statisticians at BEA one would have to conclude that they were clueless about estimating motor vehicle production and they used a wrong price index to deflate the value of auto sales. How could they make such a gross mistake and believe in their estimate 26% growth figure - when all news headlines for months have been presenting the bad news about the plight of US automakers - is anyone's guess? The alternative hypothesis is that the Q3 GDP growth number was "massaged" upwards less than two weeks before the US mid-term elections. While a 1.6% is bad and dismal enough, a 0.9% would have been an altogether awful headline.

When I brought up the issue of the wrong estimate of the Q3 GDP number during my interview at Kudlow & Co. on Friday, even the conservative host Larry Kudlow was forced to ask one of the other guests - David Malpass of Bear Stearns - whether the GDP growth figure had been manipulated upward because of the election. And Malpass agreed with me that the motor vehicle figures looked fishy and that actual motor vehicle production in Q3 was lower than officially estimated.

Personally I prefer to give to BEA - a respected and independent government agency - the benefit of the doubt before claiming political and electoral manipulation of the most sensitive macro indicator before the election. But now BEA urgently owes the public a rapid and clear response on how it estimated motor vehicle production, why its +26% growth estimate is at odds with the -12% estimate of the Federal Reserve Board, and what it is planning to do to correct such incorrect estimate. Statistical measurement is always an art rather than a science but this is such a gross and obvious mismeasurement that BEA owes the public a clear and open answer. The fudged answer that Brent Moulton of BEA gave to Bloomberg for this first estimate will frankly not do.

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http://www.rgemonitor.com/blog/roubini/154588