GDP by Industry in Real Time: Are Revisions Well Behaved?

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The monthly data for real gross domestic product (GDP) by industry are used extensively in real time both to ground the Bank of Canada’s monitoring of economic activity and in the Bank’s nowcasting tools, making these data one of the most important high-frequency time series for Canadian nowcasting. This note documents the series’ real-time properties using the reference period August 2007 to September 2017. It shows that revisions to headline GDP-by-industry growth are generally well behaved; that is, they have a zero mean and low variance and are not revised predictably. Therefore, the signal for overall growth from the first GDP-by-industry release can be received with a good deal of confidence. This analysis suggests, however, that while this result is true on average, there are times when revisions can be important. Two examples discussed are when the economy begins to contract or expand and when end-of-quarter revisions are made. Further, revisions to the industrial sectors are not as well behaved. Revisions to some sectors do not have a zero mean and are generally much larger and more volatile than those for headline growth. In addition, revisions for most sectors exhibit predictability. As a result, the monthly signal from the sector data should be considered more cautiously than should the headline growth series.