U. S. ECONOMIC ACTIVITY HOLDS STEADY IN 1ST QUARTER 2014
Washington, DC — Gross Output, a broader measure of U. S. economic activity published by the Bureau of Economic Analysis, held steady at $30,210.6 billion in the first quarter of 2014.
“The GO data demonstrates that the economy is not as bad off as GDP figures initially suggested,” stated Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, who champions Gross Output as a more comprehensive measure of economic activity. He introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). Now the BEA publishes GO on a quarterly basis in its “GDP by Industry” data.
The GO data was released by the BEA on Friday, July 25, 2014: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15
Gross Output attempts to measure the “make” economy, spending at all stages of production. According to Skousen, the latest GO data suggests that the U. S. economy did not suffer any serious decline, although it has slowed down considerably since 2013. In real terms (after taking into price inflation into account), GO declined slightly by 0.1%.
Gross Domestic Product (GDP), which represents the “use” economy, the value of final goods and services purchased by consumers, business and government, declined in nominal (-0.4%) and real terms (-0.7%) to $17,016.0 billion in the first quarter.
As Steve Landefeld, former director of the BEA, and co-editors Dale Jorgenson and William Nordhaus state in their work, A New Architecture for the U. S. National Accounts (University of Chicago Press, 2006), “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.
“Gross Output and GDP are complementary aspects of the economy,” Skousen states, “but GO does a better job of measuring total economic activity and demonstrates that business spending is holding up well and is more significant than consumer spending.”
Furthermore, he stated, “By using GO data, we see that consumer spending is actually less than 40% of economic activity, not the 70% figure that is reported by the media.”
Skousen points out that GDP leaves out a big part of the economy, business to business transactions. According to Skousen’s calculations, B-to-B rose a nominal 1% to $20,522 billion in the first quarter 2014. “That’s good news for the economy and the stock market,” he said.
Next press release on GO: The BEA plans to release the 2nd quarter 2014 Gross Output statistics on Friday, November 13, 2014.
For More Information
For more information on Gross Output (GO), B to B activity, Skousen’s proprietary Gross Domestic Expenditures (GDE), and their relationship to GDP, see the following:
Mark Skousen, “At Last, a Better Way to Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM
Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”:
Professor Steve Hanke (Johns Hopkins University): “GO: Keynes vs. Say.” http://origin.library.constantcontact.com/download/get/file/1117426113940-15/GO+J.M.+Keynes+versus+J.-B.+Say,+July+2014.pdf
Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: