“By integrating the vital role of the supply chain into national income accounting, Mark Skousen’s development of gross output (GO) has created a more dynamic and broader view of the economy, and of the central role that business plays in national income, the business cycle and economic growth. I recommend that economists seriously consider his new approach to macroeconomics.”
– Finn Kydland, Professor of Economics, University of California at Santa Barbara, 2004 Nobel prize winner
“It’s at least conceivable that gross output is a leading indicator of the economy.”
– Peter Coy, Economics Editor, New York Times (Aug 7, 2023)
Washington, DC (Thursday, April 9, 2026):
Today the federal government’s Bureau of Economic Analysis (BEA) released fourth quarter gross output (GO), the top-line that measures spending at all stages of production. Real Gross Output contracted 0.5%, which signals significant concerns about future economic growth. While real GDP expansion delivered a lethargic 0.5% growth, it remained positive, unlike GO. Both of these metrics indicate that the U.S. economy continues to face very strong headwinds against steady expansion. Economic data continues to signal that markets are fearful of President Trump’s continued trade war and the unrest in the Middle East.
Furthermore, after contracting 0.6% in Q1, growing merely 0.3% in Q2, and expanding just 1.1% in Q3, adjusted real Gross Output (GO*) contracted again 0.6% in Q4, as it did in Q1. Both GO and GO* increased slightly in Q3 but their growth lagged behind GDP, which indicated a struggle in the economy to advance at a faster pace. However, GO and GO* declining in Q4 sends a more concerning message – that despite marginal GDP growth, the economy is struggling to expand at all, and it is in real danger of contracting if the current geopolitical and economic environment persists.
After growing steadily around 2.5% in real terms during each of the two previous quarters, real consumer spending growth cooled off to 1.6% in the fourth quarter of 2025. However, the business sector – which tends to forecast economic outlook better than the consumer sector – contracted 2% in real terms on an annualized basis.
In the first half of 2025, the B2B spending decline might have been the result of retailers and suppliers purchasing of excess inventories during Q1 in anticipation that tariffs imposed by the Trump administration might result in price increases. However, that effect should have evaporated by the end of 2025. Therefore, the business decline at the end of the year carries a more significant concern about near-term business spending, which is the real driver of economic expansion.
Higher import tariffs generally increase consumer prices in the long run. Both headline and core inflation have declined in the first four months after the new administration took office in January 2025. However, since bottoming out at 2.3% in April 2025, monthly All-Items Consumer Price Index (CPI-U) published by the U.S. Bureau of Labor Statistics (BLS) has increased to 3% by the end of Q3 2025. While CPI data for October are not available because of the federal government shutdown and lapse in appropriations, the BLS reported the All-Items Consumer Price Index (CPI-U) holding steady at 2.7% for November and December 2025. January data shows CPI-U edging down further to 2.4%, which is at least one positive indicator.
The Federal Reserve (Fed) cut interest rates three times in the second half of 2025 for a total reduction of 75 basis points, which helped the job market expand slightly. After a recent peak of 4.6% in November 2025, the unemployment rate fell to 4.4 in December, and has remained in the 4.3%–4.4% range since then.
After three consecutive rate cuts, the Fed paused in early 2026 to evaluate the full impact on the economy of these recent cuts, as well as cumulative rate cuts of 175 basis points since late 2024. Advance GDP estimates for Q1 2026 indicated a relatively steady economic growth, which supported Fed’s decision to pause rate cuts in early 2026. However, with real GDP growth for Q4 2025 revised down from the advance estimate of 1.4% to just 0.5%, the Trump administration might lobby the Fed for additional cuts in 2026, especially if President Trump’s nominee – former member of the Federal Reserve Board of Governors Kevin Warsh – is confirmed and takes over from Jerome Powell as the Fed Chair in May.
[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the fourth quarter of 2025 is more than $53.8 trillion. By including gross sales at the wholesale and retail level, the Adjusted GO (GO*) expands to nearly $65 trillion in Q4 2025. Thus, the BEA omits nearly $11.2 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.
Unlike consumption, which maintains a steady long-term uptrend, business spending is significantly more volatile and more sensitive to economic fluctuations. Therefore, the sudden contraction of business spending could indicate a higher probability of a recession as we get deeper into 2026. While business spending contraction in early 2025 might have been just a result of advance spending in Q1 in anticipation of higher tariffs, the continued decline in the second half of the year is signaling potentially deeper structural causes of business spending contraction, that are less likely to be explained by inventory purchasing shifts.
We will need to wait until the BEA releases Q1 2026 data to get an indication whether B2B spending will reverse the trend and expand in early 2026. However, higher prices – especially energy prices that spiked due to the conflict in Iran – might dampen any business spending expansion that might otherwise have happened. The BEA’s data release schedule has been delayed due to the federal shutdown in October and November, and we have had to wait longer for quarterly data to become available. However, it seems that the BEA has worked through the backlog, and the Gross Output data release for first quarter of 2026 has been scheduled for its usual date in the last week of June.
GO as a Leading Indicator
In our model, GO – which includes the value of the supply chain – is a leading indicator of where the economy is headed in the year. When GO grows faster than GDP, it suggests economic expansion over the next few quarters, and vice versa. The BEA’s real GO contraction of 0.5% is trailing the real GDP expansion of 0.5%. The static view indicates clearly that the economy is facing headwinds entering 2026. While some irregularities in business spending patterns might have skewed the Q2 and Q3 data, the continued weakness in the last quarter of 2025 does not offer any clarity and raises concerns of weak economic outlook heading into 2026.
Unlike real terms that showed lethargic growth for GO and GO*, all three metrics expanded in nominal terms. GDP expanded at the highest pace of 4.2% and exceeded $31.4 trillion in Q4 2025. Nominal GO expanded at a slower pace than GDP and grew only 2.8% to reach $53.8 trillion.
The Adjusted GO – which includes the gross wholesale and gross retail figures (included only as net figures in the GO reported by the BEA) – advanced 2.7% in nominal terms and is currently just short of $65 trillion. The difference between net and gross figures amounts to more than $11.1 trillion, which is missing from the government’s official GO figure, but we include it in our Adjusted GO measure.
Our GO model has proven reliably more accurate than GDP in projecting the direction of the economy under normal circumstances. Economist and professor of applied economics at the Johns Hopkins University, Steve Hanke, stated that, “Trump’s trade wars throw another monkey wrench into the GDP metric,” and that, “for a reliable metric to take the economy’s temperature,” we should, “go with gross output.” Hanke also states that right now, “GO is flashing red.”
The Importance of GO
Most economists are still unaware of the value of GO and use only GDP when gauging economic outlook. However, gross output (GO) should be viewed as the top line in national income accounting, and GDP is the bottom line. Both metrics are essential to understanding where the economy is headed.
As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U.S. National Accounts, “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.”
As Steve Forbes has suggested, “GDP is the X-ray of the economy; GO is the CAT-scan.”
Business – Not Consumers – Drives the Economy
Another benefit of GO is that it dispels the myth that consumer spending drives the economy. Contrary to views of many academic economists and wide-spread media reports, consumer spending does not represent two-thirds of total economic activity. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law).
Therefore, our business-to-business (B2B) index is very useful for assessing the underlying health of the overall economy and its potential to bounce back after economic declines. The B2B Index measures all the business spending in the supply chain and new private capital investment. After expanding at a brisk 4.7% in Q3 2025, nominal B2B spending slowed growth to expand just 1.6% to $36.1 trillion in Q4 2025. In contrast, nominal consumer spending – which expanded 6.3% in the previous period – rose another 4.9% in Q4 to reach $21.4 trillion. The disparity is even bigger in real terms, where consumer spending rose 1.6%, but B2B contracted 2%.
“B2B spending is in fact a pretty good indicator of where the economy is headed, since it is more responsive to the boom-bust economic cycle than consumer spending,” states Mark Skousen, editor of Forecasts & Strategies and the Doti-Spogli Chair of Free Enterprise at Chapman University.
While GDP includes only a small portion of investment spending, GO accounts for significantly more of the business investment outlays, which tend to indicate economic direction over extended periods. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.”
The federal government will release the advance estimate for first-quarter 2026 GDP on April 30, 2026. Furthermore, the third estimate of GDP and the Gross output data for the first quarter of 2026 are scheduled to be released on June 25, 2026.
Important Note: We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate. We also recommend that GO be elevated in the BEA’s press releases and website as the “top line” in national income accounting, since GO data often tells a very different story than GDP data.
Report on Various Sectors of the Economy
Just like the overall economy struggled to expand, a third of the various economic segments contracted in the last quarter of 2025. After contracting six out of the past nine quarters and delivering a good 5.7% expansion in Q3 2025, the Agriculture sector ended the year with a solid 3.5% expansion in real terms. The Mining segment declined 3.7% after 4.2% expansion in Q3. After flat performance in the previous period, the Utilities segment grew 5.1% in Q4.
These three sectors account for less than 4% of the overall economy. However, since they occupy the earliest stages of production, they tend to be the foretellers of how the later stages – as well as the overall economy – might fare in the following few periods. While many other indicators show signs of a struggling economy in the immediate term, the solid growth in two out of these three segments might offer a more positive economic outlook in the more extended term.
The Construction sector, which accounts for more than 4% of the economy, declined for a third consecutive period with a 5% contraction in Q4. Manufacturing, the second largest sector with more than 14% share of the overall economy, shrunk 3.1% in Q4 2025. Even more concerning is the overall structure of the contraction. While the nondurable goods sub-segment expanded 1.3%, the durable goods sub-segment contracted 7.2%, which is an indicator of potentially deeper structural concerns for long-term economic growth. The Wholesale and Retail trades expanded slower than in the previous period, but still delivered growth of 1.3% and 1.4%, respectively. However, The Transportation and Warehousing sub-segment reversed the 8% expansion from the previous period and contracted 5.6% in the last quarter of 2025.
The Information segment delivered another solid growth of 7.2% to make it four consecutive periods of expansion. The largest segment that accounts for nearly a fifth of the overall economy – Finance, insurance, real estate, rental, and leasing – expanded 2%, which followed three consecutive quarters of growth between 2.1% and 2.8%.
The Professional and business services sector reversed growth from the previous period and shrunk 2.7% in real terms. However, the Educational services, health care, and social assistance – which accounts for nearly 10% of the overall economy – tempered its growth of 6.3% from the previous quarter and expanded 2.7% in Q4. Within this segment, educational services contracted 1.3%, while health care and social services expanded 3.3%. The Arts, entertainment, recreation, accommodation, and food services sector remained unchanged overall. However, the arts, entertainment, and recreation, sub-segment expanded 4.8%, and the accommodation, and food services sub-segment declined 1.5%.
After contracting for two consecutive quarters to start 2025, total government spending followed up a 2.1% increase from Q3 2025 with a 4.7% contraction in the last quarter of 2025. The federal government spending cut of more than 18% drove the overall contraction of the segment. While federal government workers did receive back pay, some of this spending decline still might be the result of the October/November 2025 federal government shutdown. State and local government spending still increased nearly 2%.
Gross output (GO) and GDP are complementary statistics in national income accounting. GO is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of a financial accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.
Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, businesses and government. GDP is not quite the same as the “bottom line” (profit, or net income) of an accounting statement, but rather the “value added” or the value of final use.
GO tends to be more sensitive to the business cycle, and more volatile, than GDP.
About GO and B2B Index
Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy, bigger than GDP itself. GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”
Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015 and is now available on Amazon.
Click here: Structure of Production on Amazon
The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s.
The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm
With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “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.”
Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the US economy.”
For More Information
Best summary: My paper, “GO Beyond GDP,” which explains what GO is all about, has been ranked the #1 most downloaded paper by the Social Science Research Network (SSRN). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5002052
The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: https://apps.bea.gov/iTable/?reqid=150&step=2&isuri=1&categories=gdpxind
Mark Skousen, “Slow GO May Mean a Recession Soon” Wall Street Journal, April 4, 2024: https://www.wsj.com/articles/slow-go-may-mean-a-recession-soon-us-economy-real-gross-output-65c4f1fd?mod=commentary_article_pos3
Peter Coy, “What GDP’s Cousin Can Tell Us about the Economy,” August 7, 2023, New York Times: https://www.nytimes.com/2023/08/07/opinion/gdp-recession-gross-output.html?searchResultPosition=1
Mark Skousen, “Recession Fears May Not Pass GO: GDP is Slumping, but There’s a Better Way to Gauge the Economy.” Wall Street Journal, August 11, 2022: Recession Fears May Not Pass GO – WSJ
If you are not a WSJ subscriber, you can read a copy of the article on: https://www.grossoutput.com/2022/09/12/recession-fears-may-not-pass-go/
Emma Rothschild, “Where is Capital?” in Capitalism: A Journal of History and Economics 2:2 (Summer 2021), pp. 291-371. https://muse.jhu.edu/article/798746 “Essentially an attempt to apply ideas about gross output to the economic history of the industrial revolution.”
GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000
Steve Forbes: What’s Ahead podcast. In this podcast, Steve Forbes discusses Gross Output with Mark Skousen on September 9, 2019; he compared GDP to an X-ray of the economy, and GO to a CAT-scan: https://www.forbes.com/sites/steveforbes/2019/09/09/were-using-the-wrong-measure-gdp-to-gauge-the-economys-real-health-mark-skousen/#35ff3d9a52fa
For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:
Mark Skousen, “If GDP Lags, Watch the Economy Grow,” Wall Street Journal, April 24, 2018: https://www.grossoutput.com/2018/04/26/away-go-economy-growing-faster-expected/
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”: http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/
Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/
Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say
David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economy Watch, July 24, 2017. HCWE & Co. http://www.hcwe.com/guest/EW-0717.pdf
Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015: http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf
To interview Dr. Mark Skousen on this press release, contact him at [email protected], or Ned Piplovic, Media Relations at [email protected].
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