Real GDP updates drive output gap revisions across euro area

Analyzing forecast vintages from 2002 to 2025 across euro area economies, the paper decomposes output gap revisions from the European Commission, Eurosystem, IMF, and OECD.

For a balanced panel of 11 countries between 2007 and 2025, European Commission estimates showed the smallest absolute revisions.

Eurosystem estimates improved substantially in stability over the past decade following the introduction of the Annual Supply Side Review.

OECD estimates revised the most throughout the sample.

IMF estimates appeared stable in single-year metrics but exhibited substantial revisions across full historical series.

Statistical real GDP revisions and potential growth changes account for the bulk of output gap adjustments, while nowcast errors play only a minor role.

Panel regressions across 11 euro area countries demonstrate that both statistical revisions and forecast errors systematically spill into potential output.

Around half of historical real GDP data revisions and more than one-third of two-year-ahead real GDP forecast errors are transmitted directly into potential growth revisions.

Because standard estimation models smooth output fluctuations and assume output gaps close over projection horizons, unexpected growth shortfalls are frequently reclassified ex post as permanent losses in supply capacity.