Gross Output Indicates Continued Boom in the U.S. Economy as Business Spending Expands Rapidly in Q2

Washington, DC (Thursday, November 1, 2018):  Gross output (GO), the top line of national accounting that measures spending at all stages of production, continued to build on the growth from the first quarter and advanced at an even faster pace than GDP in the second quarter.

Based on data released on Thursday, November 1, 2018 by the BEA, adjusted GO (GO*)[1] increased in real terms at an annualized rate of 4.6% in the second quarter of 2018. This increase is over 50% higher than the last period’s 2.7% growth rate and substantially higher than the real GDP’s 4.1% growth rate in the second quarter of 2018.

Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “When GO grows faster than GDP, this is a good sign of an expanding economy. Additionally, the data indicates that business investment and spending continued to expand rapidly, probably because of positive corporate earnings reports, the slightly lower concerns regarding tariffs, the new full depreciation rules and the usual weather-related uptick business activity during the spring.”

According to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a reliable leading indicator: http://www.hcwe.com/guest/EW-0118.pdf

The second quarter Skousen B2B Index, a measure of business spending throughout the supply chain, increased at 7.8% in nominal terms, which is significantly higher than the 4.5% growth rate from the previous quarter. After a slowdown in the previous quarter, the growth in the second quarter is the highest strongest growth rate since the first quarter of 2017. In the second quarter of 2018, B2B transactions rose at an annual rate of 4.4% in real terms, which is three times higher than the growth rate from the previous quarter, and faster than GDP.  Furthermore, B2B spending increase was 36% higher than the growth of consumer spending in the second quarter.

The nominal adj. GO increased at an outstanding 7.9% in the second quarter of 2018 to reach $44.4 trillion. This current adjusted GO is more than double the size of the current $20.4 trillion GDP figure, which measures final output only. After a lackluster growth in the first quarter, the broader GO* growth rate of 4.6% in real terms indicates a heating up in economic activity expansion again, most likely because of the HUGE wholesale and retail trade increase in the fourth quarter dampened the first quarter results and second quarter performance moved closer to normal levels. “I view the slower growth in GO in the 1st quarter as temporary and the economy is likely to recover in the 2nd quarter,” commented Skousen about the results in the previous quarter. The current quarter’s results indicate that Skousen’s assessment was accurate.

While growth in some industrial sectors was minor, every single sector advanced versus the previous quarter, which drove the growth of GO in the second quarter of 2018. While spending increased at mild rates the previous quarter, the current quarter’s numbers indicate a continuation of robust growth across the economy, and especially in the early stages of production, such as mining and construction. Growth in the early stages is usually a reliable leading economic indicator that overall economic growth should continue to expand.

Gross Output

Report on Various Sectors of the Economy

After a brief slowdown in the previous period, the mining sector’s growth advanced at the highest rate of any sector – 38%.

While the growth of the mining sector is quite robust and a leading indicator, it has a relatively small impact on the growth of the overall GO due to the mining sector’s low share of just 1.7% of total GO. Conversely, the manufacturing sector, which accounts for 17% of the total GO, advanced 7.2%, which was close to last period’s 7.6% growth rate. At 9.2%, the growth rate for Nondurable Goods was significantly higher than the 5.2% growth rate for Durable Goods.

The largest sector – Finance, insurance, real estate, rental and leasing – advanced at 3.8%, which was substantially lower than previous period’s growth rate of nearly 10%.

Additionally, two more segments posted double-digit percentage growth rates for the second quarter. While the Wholesale trade sector increased 10.8%, the Arts, entertainment, recreation, accommodation, and food services sector advanced 12.7%. The growth in this sector was most likely driven by the low unemployment, wage growth and overall economic growth, which provided consumer with additional funds for discretionary spending. These two segments account for a 9% combined share of total GO.

Total government spending (11% share of total GO) increased at 4%, which was higher than the 3.8% from the previous period but still considerably lower than the 6.7% average growth rate over the past two years. Additionally, this two-year average growth rate of total government spending declined for the second consecutive period after rising for five consecutive quarters. State and local government spending increased at 4.3% which was higher than the 3.2% growth of government spending at the federal level.

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, business and government. GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. Recently quarterly GO and GDP have both been growing at a similar pace.

Business Spending (B2B) Continues to Grows Faster Than Consumer Spending

Our business-to-business (B2B) index is also useful. It measures all the business spending in the supply chain and new private capital investment. Nominal B2B activity increased 7.8% in the second quarter to $25.85 trillion. Meanwhile, consumer spending rose to $13.8 trillion, which is equivalent to a 5.7% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 4.4% and consumer spending rose at a significantly slower rate of 2.7%.

Gross Output

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “The business activity resumed a strong growth trend after bucking some of the tariff, interest rates, and market correction concerns from the first quarter. Without the reduction in some of those concerns and a strong earnings season, the business community refocused on taking advantage of the tax reform bill in December 2017, and an improved business environment and a reduction in obstructive business regulations.”

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. 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.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

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: BEA – Gross Output by Industry

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

# # #

________________________________________
[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 2018 2nd quarter is slightly above $36.2 trillion. By including gross sales at the wholesale and retail level, the adjusted GO increases to more than $44.4 trillion in Q2 2018. Thus, the BEA omits more than $8 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.

US Economy Continues to Expand, but Business Spending Slows Temporarily

Washington, DC (Friday, July 20, 2018):  Gross output (GO), the top line of national accounting that measures spending at all stages of production, continued to expand in the first quarter, but at a slower pace than the previous quarter.

Based on data released on Friday, July 20, 2018 by the BEA, real GO increased at an annualized rate of 2.7% in the first quarter of 2018. This increase lags behind the last period’s 4.3% growth rate, but faster than real GDP, which increased only 2.0% in the first quarter of 2018.

Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “When Gross output grows faster than GDP, this is a good sign of an expanding economy.  However, the latest GO data indicates that business investment and spending grew at a reduced rate in the 1st quarter, probably because of concerns over Federal Reserve’s potential interest rate hikes, uncertainties regarding tariffs and possible trade wars with our trading partners, and the usual weather-related slowdown in business activity during the winter.”

Real GDP, the bottom line of national income accounting, rose at an annualized rate of 2.0% in the first quarter of 2018. The 2.7% real GO growth rate in Q1 2018 is a good indication that, while growing slower than in the Q4 2017, intermediate business activity is still expanding and should translate into continued GDP growth in the near future.

According to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a reliable leading indicator: http://www.hcwe.com/guest/EW-0118.pdf.

The first quarter Skousen B2B Index, a measure of business spending throughout the supply chain, increased at 4.5% in nominal terms, which is significantly lower than the 12.2% growth rate from the previous quarter. After a spike in the previous quarter, the growth in the first quarter puts the business spending increase at almost the same level it was in the third quarter 2017. In the first quarter of 2018, B2B transactions rose at an annual rate of 1.36% in real terms, which is just a fraction of the 8.5% rate from the previous quarter.

After experiencing its highest quarterly growth rate over the past three years in the fourth quarter of 2017, the nominal adjusted GO (GO*)[1] increased at 4.1% in the first quarter of 2018 to reach $43.1 trillion. This current adjusted GO is more than double the size of the current $20.0 trillion real GDP, which measures final output only. However, the broader GO* growth rate of just 1% in real terms indicates a cooling of in economic activity  expansion – most likely because of the HUGE wholesale and retail trade increase in the fourth quarter.  “I view the slower growth in GO in the 1st quarter as temporary,” commented Skousen.  “The economy is likely to recover in the 2nd quarter.”

All but two industrial sectors increased versus the previous quarter, which drove the growth of GO in the first quarter of 2018. While spending increased at extraordinary rates in the previous quarter, the current quarter’s numbers still indicated a robust growth in the early stages of production, such as mining, manufacturing and construction, which is usually a reliable leading economic indicator that overall economic growth should continue to expand.

Supply Chain Activity Continues to Expand

The mining sector’s growth slowed from 46% in the previous quarter to the current 12.2% rate. While lower than the Q4 2017 rate, the current growth rate is still significantly higher than the 4.7% increase in Q3 2017. However, the growth of the mining sector is still robust, it has a relatively small impact on the growth of the overall GO due to the mining sector’s low share of just 1.5% of total GO. Conversely, the manufacturing sector’s 7.6% spending increase has a much bigger impact since the manufacturing sector accounts for nearly a fifth of total GO (18.2% share). Therefore, the 7.6% current growth of the manufacturing sector, while lower than last period’s 13%, has a much greater positive impact on the total GO and should be an even better indicator of a continued economic expansion. The 5.8% growth rate for durable goods was lower than the growth rate for non-durable goods, which rose 9.5% in the first quarter.

Another sector with an 18% share of GO is the Finance, insurance, real estate, rental and leasing sector. This is one of the few sectors that expanded at a greater rate than in the previous quarter. After increasing its growth rate from 2.8% in Q3 2017 to 6% in the in Q4 2017, this sector expanded at nearly 10% in the first quarter of 2018. Within the overall sector, the Finance and insurance sub-segment rose at 16.4%, which is the highest rate increase of any sector or segment for the current period. Additionally, after rising 6.4% in the previous quarter, the real estate, rental and leasing sub-segment expanded at a slightly lower, but still respectable 5.4%.

Additionally, two more segments posted growth rates in excess of 9% for the first quarter. While the Construction sector increased 9.9%, the transportation and warehousing sector rose 9.1%. These two segments account for a combined GO share of 7.7%.

Only two segments reduced spending from the previous quarter. The Arts, entertainment, recreation, accommodation, and food services sector accounts for just 4% of the total GO and declined almost 3% which is the same decline as in the previous quarter. Additionally, the spending classified as “Other services, except government”, which accounts for 2.2% of GO, declined 2% versus Q4 2017.

Total government spending (11% share of total GO) increased at 3.8%. This rate was significantly lower than the 6.75% two-year average. The two-year average growth rate of total government spending declined for the first time after rising for five consecutive quarters. State and local government spending and Federal government spending rose at nearly identical rates of 3.8% and 3.7%, respectively.

Gross output

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, business and government. GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. Recently quarterly GO and GDP have both been growing at a similar pace.

Skousen states, “The GDP growth rate of 2.0% failed to take into account what happened behind the scenes in the supply chain in the 1st quarter.  By focusing solely on final spending and the end of the economic chain, GDP can sometimes be a misleading indicator of economic performance. GO is a much better, more comprehensive view of total economic activity along the entire supply chain.”

Business Spending (B2B) Grows Faster Than Consumer Spending

Our business-to-business (B2B) index is also useful. It measures all the business spending in the supply chain and new private capital investment. Nominal B2B activity increased 4.5% in the first quarter to $24.9 trillion. Meanwhile, consumer spending rose to $13.8 trillion, which is equivalent to a 3.4% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 1.4% and consumer spending rose 1.2%.

Gross output

 

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “The business activity cooled slightly in the first quarter of 2018 on tariff, interest rates, and market correction concerns, but still grew, partially because the business community saw the passing of the tax reform bill in December 2017 as a sign that President Trump and Congress are serious about living up to their promises that they will improve the business environment through tax cuts, as well as reduction of obstructive business regulation.”

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. 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.”

Note: Ned Piplovic assisted in providing technical data for this release.

 

For More Information

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: BEA – Gross Output by Industry

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

# # #

________________________________________
[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 2018 1st quarter is slightly below $35 trillion. By including gross sales at the wholesale and retail level, the adjusted GO increases to $43.1 trillion in Q1 2018. Thus, the BEA omits more than $8 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.

GO Slow: New Leading Indicator Predicted Slowdown in GDP

by Mark Skousen
Presidential Fellow, Chapman University
Editor, Forecasts & Strategies

For the previous two quarters (Q2 and Q3, 2017) Gross Output, the new broader measure of the economy that includes the supply chain, was growing at a slower rate than GDP.  According to my research, that suggested a slowdown in GDP.

Today the Bureau of Economic Analysis released the advance estimate for Q4 2014 GDP.  After two consecutive quarters (Q2 & Q3) of 3%-plus growth in real terms, the GDP grew only 2.6% in Q4 — just as GO predicted.

For some time now, I’ve been arguing that gross output (GO), the top line in national income accounting, is a more accurate measure of total economic activity.  Because it includes business-to-business (B2B) transactions in the earlier stages of production, GO can anticipate changes in GDP (the bottom line) as much as 12 weeks in advance.

Since the first quarter of 2017, GO has been growing at slower rate than GDP.  In Q2, real GO rose at a tepid 1.7%, substantially less than 3.1% for GDP, and in Q3 2017, real GO accelerated at 2.7% growth rate, but still less than the 3.1% real GDP growth for the 3rd quarter.  I concluded in November, “Second quarter GO suggests potential slowdown in the economy, despite the currently rising GDP.”  Please reference the 2017 Q2 and 2017 Q3 press releases for more information.

The following chart provided by David Ranson, chief economist at HCWE & Co., shows the relationship between GO, II and GDP since the third quarter of 2016.

GO

Data: Quarterly seasonally-adjusted chain-type quantity indices of intermediate inputs, gross output and gross domestic product (Bureau of Economic Analysis).

 

As David Ranson comments:  “In this chart we compare the growth of gross output (GO) and intermediate output (II) with the growth of GDP over the past year (all in real terms). The chart begins with the third quarter of 2016 because, prior to that, all three variables were moving in close parallel. At that point a substantial divergence opened up, as the growth of intermediate output (and GO) raced ahead of GDP growth. That implied an acceleration in GDP growth which we have been experiencing. Now, just-released third-quarter figures for GO and II suggest that a re-convergence has begun: in the second and third quarters of 2017 growth in GO and II has fallen below the growth rate of GDP. That implies that GDP will stabilize and possibly decelerate later in 2018.”

 


For more information on Gross Output (GO), the Skousen B2B Index, 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”: 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,” Economic Watch, July 24, 2017. HCWE, Inc. 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 mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

 

2ND QUARTER GROSS OUTPUT SHOWS SURPRISE SLOWDOWN IN ECONOMY

Washington, DC (Thursday, November 2, 2017): Gross output (GO), the top line of national accounting and a leading economic indicator, grew at a slower pace than GDP in the second quarter 2017, indicating a sudden slowdown in economic activity.  Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “My research shows that whenever GO grows slower than GDP, it suggests a potential decline in economic growth and if this trend persists, a recession could follow.  While GO grew at a slower pace, there is no still no evidence of a recession.”

Based on data released on Thursday, November 2, 2017 by the BEA and adjusted to include all sales throughout the production process, nominal adjusted GO (GO*) increased at an annualized rate of 2.9% in the second quarter of 2017, which is significantly lower than the previous quarter’s increase of 6.0%[1]. Nominal adjusted GO for the second quarter of 2017 grew at slower pace than the 4.0% nominal GDP growth and the 3.6% growth of the unadjusted GO reported by the BEA.

Real GDP, the bottom line of national income accounting, rose at an annualized rate of 3.1% in the second quarter 2017.  Real GO* generally grows at a higher rate than real GDP during an economic expansion.  However, in Q2 2017, real GO* grew at only 1.7%.

Skousen states, “By focusing solely on final spending and the end of the economic chain, GDP can sometimes be a misleading indicator of economic performance.  GO is a much better, more comprehensive view of total economic activity along the entire supply chain, and indicates a less positive outlook right now.”

In fact, according to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a new leading indicator: http://www.hcwe.com/guest/EW-0717.pdf

Skousen B2B Index Also Slows Dramatically

The Skousen B2B Index, a measure of business spending throughout the supply chain, increased at 2.6% in Q2, which is significantly less than the 8.1% growth rate from the previous quarter. This is the first slowdown after four consecutive quarters of strong B2B growth of 5% or more. In the second quarter, B2B transactions rose at an annual rate of 1.4% in real terms.

After four quarters of strong growth, the adjusted GO rose at slower pace, but still increased to reach $41.27 trillion. The current adjusted GO is more than double the size of GDP ($19.25 trillion), which measures final output only.

Supply Chain Activity Continues Increasing, But at a Slower Pace

Out of the 29 Industries and sectors defined within GO, 26 sectors rose compared to the previous quarter. The mining sector grew 8.3% in the second quarter 2017, the most of any sector, but this was relatively small compared to the 62.7% annualized growth in the first quarter 2017. Moreover, the mining sector accounts for just 1% share of total GO, which diminishes the impact of this small increase on the overall GO.  In contrast, the manufacturing sector is almost a fifth of total GO (18% share). Therefore, the 1.2% annualized growth of the manufacturing sector has a much greater impact on the total GO. With a 2.6% annualized growth rate, durable goods outpaced non-durable goods, which fell 0.2% compared to the previous quarter.

Another sector with an 18% share of GO is the finance, insurance, real estate, rental and leasing sector. In the second quarter, this sector grew at a 7.0% annualized rate in nominal terms, which is higher than the 6.7% increase in the first quarter 2017. The finance and insurance subsector, which accounts for 8% of total GO by itself, rose 11.1%.

Compared to the previous quarter, spending fell significantly in only two sectors. The largest drop of 4.8% is in the agriculture, forestry, fishing and hunting sector. The Construction sector was down 5.7%. The aforementioned non-durables sector and the accommodation and food services sector were virtually flat with no change to the previous quarter. These four sectors combined account for a 17% share of the total GO. Therefore, the negative performance of these few sectors had a noticeable impact on the overall GO growth.

The other surprise in 2nd quarter GO was the dramatic slowdown in wholesale and retail trade. Compared to Q1, total retail trade rose only 0.3% and the Wholesale trade actually fell a marginal 0.1%.

Total government spending (11% share of total GO) increased 2.9% in the second quarter. This growth rate is marginally lower than last quarter’s 3% growth rate. The federal government grew at an annualized rate of 2.2% in nominal terms and state and local government grew at a slightly higher rate of 3.2%.

GROSS OUTPUT

GO and GDP are “Top Line” and “Bottom Line” of National Accounting

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, business and government.  GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. The fact that the adjusted GO has continued to grow faster than GDP (most of the time) is a positive sign.

Business Spending (B2B) Grows Slower Than Consumer Spending

We have also created a new business-to-business (B2B) index based on GO data.  It measures all the business spending in the supply chain and new private capital investment.  Nominal B2B activity increased 2.6% to $23.67 trillion.  Meanwhile, consumer spending rose to $13.3 trillion in the second quarter, which is equivalent to a 3.5% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 1.4% and consumer spending rose 2.5%.

GROSS OUTPUT

“B2B spending is a pretty good indicator of where the economy is headed, since it measures business spending along the entire supply chain,” stated Skousen.  “The fact that business activity has slowed down in the 2nd quarter is a bit surprising, given the pro-business legislation is that expected to become law soon.”

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.  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 “valued added,” that is, “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.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

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: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the new website, www.grossoutput.com (still in development), as well as the following:

Mark Skousen, “GO Beyond GDP:  Introducing Gross Output as the Top Line in National Income Accounting,” presented as the 2017 Schumpeter Lecture in Stockholm, Sweden, sponsored by the Swedish Entrepreneurship Forum:  http://entreprenorskapsforum.se/wp-content/uploads/2017/10/PS_Skousen_web.pdf

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,” Economic Watch, July 24, 2017.  HCWE, Inc. 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 mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

# # #

[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 2017 2nd quarter is $33.2 trillion.  By including gross sales at the wholesale and retail level, the adjusted GO is $41.27 trillion in Q2 2017.  Thus, the BEA omits $7.8 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.

 

Groundbreaking

SQUARING THE MISES CIRCLE

“Eureka!  Skousen has done the impossible.  Students love it!  I will never go back to another textbook.”

Professor Harry Veryser, University of Detroit-Mercy

Economic Logic

They said it couldn’t be done.  Austrian economics is so different, they said, that it couldn’t be integrated into standard “neo-classical” textbooks.  Consequently, college students learn little or nothing about the great Austrian economists (Mises, Hayek, Schumpeter).

 Starting with Menger’s “Theory of the Good” and the Profit-and-Loss Income Statement

Professor Mark Skousen’s Economic Logic (now in its new 5th edition) aims to change that.  Based on his popular course taught at Chapman University, Columbia Business School, and other institutions, Skousen starts his “micro” section with Carl Menger’s “theory of the good” and the profit-and-loss income statement to explain the dynamics of the market process, entrepreneurship, and the advantages of saving.  Business students find this approach especially valuable.  After analyzing the dynamics of the P&L statement, supply and demand diagrams are introduced.

 Linking Micro and Macro

Then he incorporates a simplified version of “Hayek’s Triangles,” a powerful four-stage model of the economy to link micro and macro economics for the first time.  For micro, he uses Stanford Professor John Taylor’s 4-stage process of making coffee:

Coffee_Chart_02Figure 1.  Four Stages of Production of Espresso Coffee.

 Then for the macro model, Dr. Skousen uses this universal 4-stage diagram:

4-stage_model_02bNotice that this Hayekian 4-stage model ties into national income accounting.  GDP represents the final stage of production – the value of all finished goods and services produced in a year.

GO Behind GDP:  Measuring Hayek’s Triangle

Every quarter a public-traded company releases a financial statement that includes both the “top line” (revenues/sales) and a “bottom line” (earnings, net income).

Using the 4-stage model of the economy, Skousen applies the same approach to national income accounting.  Based on his work, The Structure of Production (NYU Press, 1990), he identifies gross output (GO) as the value of all 4 stages of production (#1 through #4 above) or the “top line” in national income accounting, and GDP (stage #4) as the “bottom line.”

GO is a measure of Hayek’s triangle.  It adds up sales or revenues at all stages of production throughout the year, while GDP counts only final sales.

GO is a vital statistic, as it includes the value of the supply chain, all the business-to-business (B2B) transactions that move the production process toward final use.  It is a measure of the “make” economy, while GDP estimates the value of the “use” economy.

In Economic Logic, GO is incorporated as a more comprehensive measure of the economy, serves as a valuable tool in analyzing the business cycle, restores the business sector as the major driver of the economy, and deserves to be updated on a quarterly basis along with GDP.

GO is now a reality.  In April, 2014, the Bureau of Economic Analysis (BEA) in the Department of Commerce announced it will publish GO every quarter along with GDP.  Austrian economics (Hayek’s triangles) is now officially part of macroeconomic accounting!   (For Skousen’s latest press release on GO, go to www.mskousen.com.)

For the first time, the 5th edition of Economic Logic fully integrates GO in the chapters 14-15 on national income accounting and throughout the textbook.  GO is presented as the top line, and GDP as the bottom line in national accounting.  As economists Dale W. Jorgenson, Stephen Landefeld, and Bill Nordhaus state in their book “A New Architecture in US 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.”

 Added Highlights to the 5th Edition

In addition, here’s new material found in the 5th edition:

  • John Mackey’s “stakeholder” model of capitalism has been incorporated into the stages-of-production process in chapter 3. Moving the production process along requires the cooperation of all economic inputs or stakeholders.
  • Updated discussions on job creation, the labor force participation rate, and the recovery after the Great Recession is discussed in detail in chapters 10 and 25. Chapter 10 also addresses the unemployment issues in Europe and America, and the prospects for renewed growth under a Trump administration.
  • Recent government regulations (Sarbanes-Oxley, Dodd-Frank, SEC) following the 2008 financial crisis and the Bernie Madoff fraud are discussed in chapter 13.
  • The consumption and savings rate patterns of China are compared to those of the United States in chapter 17. This comparison helps to determine what drives the economy, consumer spending or savings/investment?
  • The end of the Federal Reserve’s “easy money” policies of ZIRP (zero interest rate policy) and Quantitative Easing (QE) in 2017 are debated in chapter 19.
  • The on-going debate on “austerity” vs. “stimulus” has been added to chapter 22.
  • What factor is more significant in the business cycle, Keynesian lack of “aggregate demand” or Hayekian “malinvestment”? See chapter 25.
  • The rise of state capitalism in China is highlighted in chapter 27.
  • The international gold standard, the defects of central banking, and the Mises/Hayek theory of the business cycle.
  • A full critique of the Keynesian Aggregate Supply and Demand (AS-AD) model, and a revolutionary Austrian alternative (chapters 22 and 25).  Plus a critique of Marxism and socialist central planning (chapter 27).
  • Entrepreneurship, the financial markets, environmental economics, monetary policy and inflation, federal spending and taxes, and government regulation.
  • Leaders of all schools, including Austrian, Keynesians, Marxist, Chicago, and Public Choice.
  • Austrians highlighted include Ludwig von Mises (chapter 2), Carl Menger (3), Joseph Schumpeter and Israel Kirzner (8) Eugen Böhm-Bawerk (11), Peter F. Drucker (12), Murray Rothbard (18), and Friedrich Hayek (25).  Other highlighted free-market economists include Adam Smith, Gary Becker, George Stigler, John Bates Clark, J. B. Say, Milton Friedman, James Buchanan, Art Laffer, Ronald Coase, Julian Simon, and Robert Mundell.
  • Economic Logic is dedicated to Friedrich Hayek and Milton Friedman, thus drawing from the best of the Austrian and Chicago schools of free-market economics.
  • A glossary of terms has been added to this edition.

 What Economists Are Saying

“An excellent balance of theory and the real world that no other text has achieved.”

– Charles Baird, CalState East Bay


“Better than any book out there!  Skousen presents real business economics in a clear, provocative and logical fashion.”

– Ian Mackechnie, University of Wales


“Perfect for any economics student — designed to maximize learning while minimizing monotony.  Simple, direct, and comprehensive.”

– K. Au, home school instructor


“My college econ classes, filled with perplexing theories like the paradox of thrift, GDP and Keynesian fiscal policy, were completely refuted by this excellent free-market textbook.  Students, if your professors don’t use this text, get it for yourself so you can really understand the concepts of sound economics.”

– Amazon review


 

 SPECIAL OFFER: 

ONLY $39.95

This new 5th edition (2017) of Economic Logic is a 714-page quality paperback published by Capital Press/Regnery.  It retails for $79.95, but is available at a discount — only $39.95, plus $5 shipping & handling (for all orders outside the US, add an additional $15), by calling Ensign Publishing at:

1-866-254-2057

 

 About the Author

Mark Skousen, Ph. D., is a Presidential Professor at Chapman University, has taught economics at Columbia University, is the former president of FEE, and is the author of over 25 books, including several in Austrian economics:  The Structure of Production (NYU Press); Vienna and Chicago, Friends or Foes? (Capital Press), The Making of Modern Economics (Routledge), and A Viennese Waltz Down Wall Street:  Austrian Economics for Investors (LFB Books).  For more information, go to www.mskousen.com.

http://mskousen.com/2017/10/2322squaring-the-mises-circle/

RAPID GROWTH IN 1ST QUARTER GO: ECONOMY IS NOT SLOWING DOWN

By: MARK SKOUSEN

Washington, DC (Wednesday, July 26, 2017): Gross output (GO), the top line of national accounting that measures spending at all stages of production, continued to increase much faster than GDP in the first quarter 2017, indicating a continued strong economy for 2017.  Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “First quarter GO suggests that a robust economy, despite a slowdown in GDP.”

Based on data released on Friday, July 21, 2017 by the BEA and adjusted to include all sales throughout the production process, nominal adjusted GO (GO*) increased at an annualized rate of 6.0% in the first quarter of 2017, which is just slightly lower than the previous quarter’s increase of 6.2%[1]. Nominal adjusted GO for the first quarter of 2017 increased substantially faster than 3.3% GDP growth and faster than the 5.6% growth of the unadjusted GO reported by the BEA.

Real GDP, the bottom line of national income accounting, rose at an annualized rate of 1.4% in the first quarter 2017.  Real GO* continues to grow much faster at a 2.5% rate.

Skousen states, “By focusing solely on final spending and the end of the economic chain, GDP can sometimes be a misleading indicator of economic performance.  GO is a much better, more comprehensive view of total economic activity along the entire supply chain, and indicates a much more positive outlook.”

Moreover, according to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a reliable leading indicator:  http://www.hcwe.com/guest/EW-0717.pdf

The Skousen B2B Index, a measure of business spending throughout the supply chain, continued growing at a brisk pace in the first quarter 2017. This continued growth indicates a sustained business activity recovery that started in the fourth quarter 2016 following the November presidential election of Donald Trump and continued through the first quarter of President Trump’s administration. In the first quarter, B2B transactions rose at an annual rate of 6.6% in nominal terms or 3.12% in real terms. Over the past two quarters – Q4 2016 and Q1 2017 – business spending increased a total of 15%. Last time that the Skousen B2B Index showed a business spending growth of 15% or more over two quarters was in the beginning of 2014.

After breaking the $40 trillion mark for the first time in the previous quarter, adjusted GO rose to $41.2 trillion and reached another first by exceeding the $41 trillion mark in the first quarter 2017. The current adj. GO is more than double the size of GDP ($19 trillion), which measures final output only.

The overall growth of GO resulted from the growth of almost all individual industries and sectors – especially industries in the early stages of production. Increased spending in the early stages, which tend to be leading economic indicators, is a good indication that the overall economy should continue expanding over the next few quarters.

Supply Chain Activity Continues Increasing

Out of the 29 Industries and sectors defined within GO, 26 sectors rose compared to the previous quarter. The mining sector followed a 30.2% annualized growth in the fourth quarter 2016 with a 62.7% boost in the first quarter 2017. However, the mining sector accounts for just 1% share of total GO, which diminishes the impact of this large increase on the overall GO. On the contrary, the manufacturing sector is almost a fifth of total GO (18% share). Therefore, the 6.3% annualized growth of the manufacturing sector has a much greater positive impact on the total GO. With a 9.6% annualized growth rate, non-durable goods outpaced durable goods, which rose at 4%.

Another sector with an 18% share of GO is the finance, insurance, real estate, rental and leasing sector. In the first quarter, this sector grew at a 6.7% annualized rate in nominal terms, which is 71% higher than the 4% increase in the fourth quarter 2016. The real estate, rental and leasing subsector, which accounts for 11.4% of total GO by itself, rose 5.6%

Compared to the previous quarter, spending fell in only three sectors. The largest drop of 12.7% is in the utilities sector. The arts, entertainment & recreation sector is down 3.6% and management of companies and enterprises fell 1.8%. However, these three sectors combined account for just 4.1% share of the total GO. Therefore, the negative performance of these few sectors could not dampen the continued growth of the GO overall.
Total government spending (11% share of total GO) increased 3% in the first quarter. While that growth rate is not particularly high, it is 50% higher than the previous quarter’s growth rate of 2%. The federal government grew at an annualized rate of only 0.5% in nominal terms and state and local government grew at a significantly higher rate of 4.1%.

Gross Output

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, business and government.  GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. The fact that the adjusted GO continued to grow faster than GDP is a positive sign.

Business Spending (B2B) Grows Faster Than Consumer Spending

We have also created a new business-to-business (B2B) index based on GO data.  It measures all the business spending in the supply chain and new private capital investment.  Nominal B2B activity increased 7.7% to $23.75 trillion.  Meanwhile, consumer spending rose to $13.1 trillion in the first quarter, which is equivalent to a 3.4% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 4.2% and consumer spending rose 1.5%.

Gross Output

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “There is no doubt that business activity has picked up in expectation of pro-business legislation in 2017.”

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.  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.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

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: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

Mark Skousen, “At Last, a Better Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: https://www.wsj.com/articles/mark-skousen-at-last-a-better-economic-measure-1398209717 

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,” Economic Watch, July 24, 2017.  HCWE, Inc. http://www.hcwe.com/guest/EW-0717.pdf

New:  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 mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

# # #

________________________________________
[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 2017 1st quarter is $33.3 trillion.  By including gross sales at the wholesale and retail level, the adjusted GO is $41.2 trillion in Q1 2017.  Thus, the BEA omits $7.9 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.