Techonomics
The Government Stops Reporting Real Computer Figures Reason for Report: Hedonic Pricing Update
Highlights:
* We previously have pointed out that the government's use of hedonic pricing, a price deflator that translates nominal into real dollars, appears to overstate technology demand.
* The problem is mostly in the reporting of computer hardware. For example, applying hedonic pricing for 2000-03 multiplies the nominal dollar increase by eight times to come up with real dollars spent. That's money that no vendor saw and overstates real GDP and productivity growth, in our opinion.
* The Bureau of Economic Analysis has stopped reporting the real computer hardware shipment figure used to calculate real GDP though it is still used in GDP calculations. It said, "Commerce was concerned the rapid price declines for computers made the figures misleading."
* If it's misleading, we recommend that the government improve upon its hedonic pricing model to eliminate the exaggerated spending. But if the BEA continues to use the current model, it should at least report the real dollars and not just the nominal figures. Hiding the calculation does not help the users of economic data.