Thursday, January 7, 2010

Why Does It Feel Worse than Reported?

Gross Domestic Purchases are (per Babylon):

The market value of goods and services purchased by U.S. residents, regardless of where those goods and services were produced. It is gross domestic product (GDP) minus net exports of goods and services. Equivalently, it is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 sum of personal consumption expenditures (PCE), gross private domestic investment, and government consumption expenditures and gross investment.
dblywo (with patience) detailed cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 divergence between GDP and Gross Domestic Purchases in recent years, commenting:
For 4-5 decades cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y tracked closely, especially on a YoY basis but started diverging in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 last five years. I find that GDPx is much more useful right now for linking to PCE, Employment, et.al.
And here is a chart showing cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 five year annualized change in both GDP and Gross Domestic Purchases.



So what does this show us?

It shows that consumption over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 years leading up to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 crisis grew much faster than what we actually produced. This, was never sustainable. In addition, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 furcá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r one moves down this path, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 more difficult it becomes to grow off of this higher / boosted base. As a result, in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent period growth in purchases has not been able to keep up with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 growth seen in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 headline GDP figure, even though net exports have remained negative (i.e. we still consume more than we produce, just not cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 larger level needed to maintain growth). Putting numbers to this, GDP has grown at a bit more than 1% annualized over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 past five years, whereas growth in Gross Domestic Purchases over that period was only 0.5% annualized (low and lower).

So what does this mean?

It means that we became accustomed to living beyond our means, irrelevant of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 actual production that was created within cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 confines of any GDP figure. This is one of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 reasons that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent GDP figures have not reflected what has actually been felt by each of us... cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent economic decline has in fact felt much worse.

The below chart makes this more clear. It is a chart similar to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 one shown above, but is on a per capita basis.



As one can see, Gross Domestic Purchases per capita (i.e. GDP less net exports) is now less than it was FIVE years earlier... cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 first time this has happened since at least WWII.

Source: BEA

5 comments:

  1. Very nicely done, patience rewarded: :)

    ReplyDelete
  2. What would be helpful here is a NET figure (& chart, of course) showing cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 shift (gross & per capita) from production surplus to consumption surplus. It's a little hard to read between cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 lines (literally) in this graphic.

    ReplyDelete
  3. Will do this evening (traveling).

    ReplyDelete
  4. I love cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 blog. You always post great, informative "econompics"; however, I must say this is your best. Very helpful at explaining economic growth versus economic reality.

    I look forward to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 post later tonight on production surplus vs. consumptions surplus.

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  5. Unable to believe cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 revised release, I went and looked up cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 GDP technical definition. It includes health care paid by employers. That cost has been going up 4-6% per year. It puts no cash in your pocket.

    ReplyDelete