U.S. Will Quit Issuing ‘Flash’ GNP Forecasts

The federal government will stop compiling and issuing its “flash” forecast of quarterly economic activity because the preliminary estimate “can be misleading,” Commerce Secretary Malcolm Baldrige said Monday.

“We can save the taxpayers money and improve accuracy by halting the compilation of the flash forecast, where we were a long way from perfect,” Baldrige said.

The flash estimate is basically a guess about the size of the gross national product, which measures the total worth of the nation’s economic activity, ranging from the output of a ton of steel to the value of a haircut. Originally compiled only for the government’s internal use, the figure has usually been issued very late in each quarter and is designed to give a quick glimpse of business health during that three-month period.

Financial markets, always quick to respond to news from Washington, can be noticeably influenced by a flash figure that later is shown to be highly misleading when final figures become available.

For example, the flash estimate for the last quarter of 1985 showed a healthy growth of 3.2% in the nation’s output of goods and service. But a revised figure, issued last week and based on more complete information, showed an anemic economic expansion of just 2.4%. Although the Commerce Department has issued warnings about the use of the flash estimate, “in financial circles” the figure “is still considered an actual statistic,” Baldrige noted.

Although the flash forecast purports to show activity during a full three months, much of the information--for investment and inventories--is based on only two months’ worth of results.

The flash figure has been compiled by the government for 20 years, but the Commerce Department did not begin publishing it formally each quarter until September, 1983, after several incidents in which the number had been leaked without authorization to the press.

Not Likely to Be Missed

With the elimination of the flash figure, the government’s estimate of the GNP that is published in the third week after quarter ends will become the first news about quarterly business performance.

The flash estimate, although sometimes helpful, is not likely to be missed, economists said.

“I don’t think the republic will suffer enormously by the elimination of this statistic,” said Jerry Jasinowski, senior vice president and chief economist of the National Assn. of Manufacturers. “It’s just not a major issue with respect to being able to track the economy. It is useful, but other indices can provide much of the data.”