Subscribe By RSS
The New GDP Numbers, Another Look
By Bob McTeer on August 6, 2009 | More Posts By Bob McTeer | Author's Website
Gross Domestic Product (GDP) and real GDP are generated by total U.S. spending on final goods and services. The U.S. national income accounts use the spending categories of Consumption (C) plus Investment (I) plus Government spending (G) plus Exports minus Imports (X-M). GDP = C + I +G + X - M.
(These categories roughly correspond to the categories Keynes outlined in his General Theory of Employment, Interest and Money.)
The net change in second quarter real U.S. GDP was a decline of 1 percent at an annual rate. This is down from the 6.4 percent rate of decline (revised) in the first quarter of 2009. The percentage contributions of the main categories of spending to the 1 percent decline in the second quarter real GDP are listed below:
| Percentage Contribution | ||
| C | -0.88 | A surprisingly small decline in consumption (But remember the size of the base) |
| I | -2.64 | A very large decline in investment (Smaller base) |
| G | +1.12 | Government spending seems small considering recent developments |
| X | -0.76 | Less positive exports was a drag |
| M | +2.14 | Less negative imports were more important |
| GDP | -1.02 | (A small 0.02 rounding error) |
More detail and commentary follow. However, these are percentage change numbers rather than percentage contribution numbers. Don’t try to reconcile with those above.
U.S. Personal Consumption Expenditures swung to a 1.2% decline in the 2nd quarter from a 0.6% increase in the 1st quarter (1st Q.). The total swing was a negative 1.8%.
The net -2.64 change in 2nd quarter U.S. Gross Private Domestic Investment resulted from the following five categories of investment:
An -8.9% change in nonresidential fixed investment, much better than the -39.2 net change in the 1st Q.;
An -8.9% change in nonresidential structures, compared to a -43.6% change in the 1st Q.
A -9.0% change in equipment and software from 36.4% in 1st Q.
A -29.3% change in residential fixed investment compared to 38.2% in the 1st.
A change of -0.83% in inventories compared to -2.36% in 1st Q.
(All the investment components were negative for GDP, but less negative than in the 1st quarter.)
Special Attention:
Inventory declines (disinvestment) in both quarters augur well for inventory rebuilding in subsequent quarters, possibly the current quarter. This will be a cyclical boost to GDP.
Imports actually declined, which has a positive impact on GDP. Exports declined and reduced their positive impact on GDP.
Net exports (Exports - Imports) were a positive to GDP change, but most the help came from a decline in imports. A decline in imports is not positive per se, but it reflects a shift in spending to U.S. domestic goods and services from foreign goods and services, which means the income generated will be more domestic and less foreign.
Subscribe by RSS 
Subscribe by Email
Email This Post To A Friend
