U.S. Economic Data Aren't Adding Up
Either corporate profits are being grossly overstated, the trade deficit is much narrower than implied by customs data, or business investment is being severely undercounted.
There is a puzzle at the heart of the U.S. national income and product accounts. It is a puzzle that has been bothering me since January, and it is only getting more puzzling with each subsequent data release.
Nearly $1 trillion of economic activity is missing from the U.S. GDP numbers. Or, alternatively, the pretax income earned by workers and businesses in the U.S. is being overestimated by almost $1 trillion. Or perhaps production is being undercounted at the same time as income is being overcounted. Whatever the exact explanation, the point is that crucial elements of the headline U.S. economic data are somehow wrong. My strong suspicion is that existing methods for tracking capital spending by American businesses on both physical and intangible assets are failing to capture what companies are actually doing.