Estimate of Gross State Product May Be Too Low

The Los Angeles County Economic Development Corp. estimated that gross state product of California was $1.309 trillion in 2001, slightly less than France’s gross domestic product of $1.310 trillion, as estimated by the Organization for Economic Cooperation and Development [“California Economy Already Recovering,” Sept. 16].

This small difference, a revision of data that initially put California ahead of France, dropped California from fifth to sixth in the rankings of the world’s leading economies.

The organization’s estimate of the gross state product in 2001 seems too low. I say “seems” because the official number will not be released by the Commerce Department’s Bureau of Economic Analysis until June 2003.

The most recent official number is $1.344 trillion for 2000.

To estimate the gross state product for a year, we assume that it grew by the same amount as total state personal income in that year. Personal income is a key component of gross state product, representing about 80%, and statistics on total state personal income are considerably more current. This approximation has proved to be very good in the past.

Three independent sources estimate personal income in California increased in 2001. The Bureau of Economic Analysis estimates it increased 3.1%, the California Department of Finance estimates it was up 1.8% and the UCLA Anderson Forecast has it up 2%.

Accordingly, we are very confident that California still ranks fifth in 2001.

Howard Roth

Chief Economist

California Department of Finance

Sacramento