Gross Domestic Product. Tomorrow the Bureau of Economic Analysis (BEA) will release its first estimate of gross domestic product (GDP) for the first quarter 2014. The current consensus estimate is that real GDP grew at an annualized rate of around one percent during the quarter. Private forecasters estimate that the unusually cold weather may have subtracted as much as 1.4 percentage points from the first quarter’s growth rate. Those same forecasters estimate that the shift caused by the weather will result in a similarly higher growth rate in the second quarter. Even without the negative effect of weather on the growth rate, real GDP growth would only have reached the annualized growth rate of the recovery.
Measuring Gross Output. Beginning April 25th, BEA debuted quarterly estimates of gross domestic product (GDP) generated by each of the 22 industries identified in the economy, which were previously reported on an annual basis only. GDP by industry is a measure of value added of final products for each industry group.
In addition, the BEA began measuring gross output on a quarterly basis. Gross output is the market value of goods and services produced by an industry. Its components include: commodity taxes, sales or receipts and other operating income, and inventory change. In other words, gross output by industry is a measure of value added plus intermediate inputs.
Gross output has the potential to be a powerful complementary tool to GDP, but gross output is not a substitution for GDP. GDP measures all economic activities once, but only once; aggregate gross output counts some economic activities multiple times. Confusing these two very distinctive measures of economic activity would misinform rather than enlighten policymakers and the public on the breadth and scope of America’s dynamic economy.
The quarterly industry-level GDP data begins the first quarter of 2005 and spans through the latest release, the fourth quarter of 2013. This data will not only provide more timely industry-level data for businesses and policymakers about turning points and trends within the economy, but will also help identify which industries are presenting the strongest and weakest economic growth, and whether the growth is broadly across industries or concentrated in just a few. For example, in 2005, GDP grew 3.4 percent, and finance, insurance real estate, rental and leasing contributed to 1.3 percentage points of growth in that year, indicating just a handful of industries contributed significant growth. Going forward, the data is expected to be released within 30 days after the “third” release of the latest quarterly data for GDP.
See the full JEC Republican Commentary attached below: