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Vol. 68, No. 6
Posted 1986-06-01

How Federal Farm Spending Distorts Measures of Economic Activity

by John A. Tatom

John A. Tatom explains how transactions by the Commodity Credit Corporation (CCC) are treated in the National Income and Product Accounts (NIPA). Tatom shows that the volatile, quarter-to-quarter pattern of CCC payments to farmers affects measures of farm, business, government, and overall economic activity. According to the author, the recent unusual developments have complicated the interpretation of some key measures of economic performance. He points out that adjusting for these movements can alter significantly conclusions about the short-term performance and economic outlook for federal purchases, business inventory investment, and final sales in the economy. Tatom explains that analysts are likely to be misled about the economy’s short run economic performance unless they properly adjust the NIPA measures when large changes in CCC purchases occur.



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