Friday, October 29, 2010

Latest GDP Report broken down by its component parts---We need more "P" in our GDP!

Latest GDP report. This graphic shows the breakdown of each component of GDP (C + I + G + N(x) ) and each sectors contribution to GDP in percentage terms.  Consumption  (C) is the value of domestic production that purchased by individuals. Investment (I) is the value of domestic production purchased by  businesses to use in conducting business. Government (G) is the value of domestic production purchased by local, state, federal government agencies. Net Exports (N(x)) is Exports, domestic production purchased by foreigners MINUS Imports, foreign production purchased by Americans domestically.  Notice that this results in a rather large negative contribution to GDP.  When you add the positives (C+I+G) and subtract the negative (N(x)) you get a 3rd quarter (at an annualized rate) increase in GDP of 2.0%.  Tepid.  If you refer to past blog entries concerning actual GDP relative to potential GDP, you know we have a significant output gap.  We must grow faster than 2.0% to get back to full-employment by 2016-2020.  Just chugging along...

Wall Street Journal
Update: Below is a BETTER breakdown of the component parts of GDP, especially with "I"  Investment Expenditures.  Remember, residential housing is a part of "I", not "C" as we might intuitively think.  I believe this will be a drag on GDP for sometime.  It suggests an over-allocation of resources towards many aspects of the housing market and will require a much longer time lag to re-adjust itself.  Those resouces will have to find a new place to settle within "I" or one of the other components of GDP. 
Business Insider

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