Washington, DC (Thursday, January 22, 2015): Gross Output, a broader measure of U. S. economic activity published by the Bureau of Economic Analysis, advanced to nearly $31.3 trillion in the third quarter of 2014, a 5.2% jump in real terms (annualized). The GO data released by the BEA can be found at http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15
Gross Output (GO) is a measure of sales or receipts of all industries throughout the production process, including business to business transactions.
As has been the case throughout 2014, GO advanced faster than GDP. Gross Domestic Product (GDP), which measures the value of final goods and services only, rose 5.0% in real terms to $17.6 trillion in the third quarter.
“The GO data demonstrates that the economy is still accelerating,” stated Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University. Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out a big part of the economy, business to business transactions in the production of intermediate inputs,” he notes. “GO includes most B to B activity that is vital to the production process.”
Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990, new third edition forthcoming in 2015). Now the BEA publishes GO on a quarterly basis in its “GDP by Industry” data, the first aggregate statistic to be published on a quarterly basis since GDP was introduced in the 1940s.
“Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and demonstrates that business spending is more significant than consumer spending,” he says. “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.”
According to the Skousen B-to-B Index, total business spending throughout the supply chain reached $23.0 trillion in the 3rd quarter 2014, compared to personal consumption expenditures of $12 trillion. “Thus, we see that business spending is almost twice the size of consumer spending in the US economy,” concludes Skousen.
Skousen also notes that during downturns GO tends to fall faster than GDP, while during expansions GO rises faster than GDP.
Note: Ned Piplovic assisted in providing technical data for this release.
For More Information
For more information on Gross Output (GO), B to B activity, 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”:
Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”:
To interview Dr. Mark Skousen on this press release, contact Valerie Durham, Media Relations, [email protected].
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