"We're finally back to 1934 -- a breakthrough in national accounting."
--Stephen Landefeld, director, Bureau of Economic Analysis (BEA)
On Tuesday, I drove from New York City to Washington, D.C., to attend a special workshop presented by the Bureau of Economic Analysis, the government agency that produces the quarterly gross domestic product (GDP) statistics. This three-hour meeting was all about the new Gross Output data that will be released every quarter starting Friday, April 25.
BEA director Steve Landefeld opened the session explaining why the new Gross Output (GO) offers a "unique perspective" on the production side of the economy, or what they call "the make" economy.
GDP measures the "use" economy -- the value of all finished goods and services produced and sold in the economy in one year. Currently, GDP is approximately $17 trillion.
GO measures the "make" economy -- the value of all stages of production of goods and services -- both finished and unfinished. Currently, GO is approximately $30 trillion, nearly double the U.S. GDP.
Why is GO just as important as GDP? As I explained in the meeting, it's like publicly traded companies reporting both revenues/sales and profits/earnings. Both are vital to understanding how the company is doing.
The same is true in the economy. GDP measures the value of the final goods and services, but you also want to know how much business spent in making these final products and services. GO does that.
I wrote a major article on this subject forForbesmagazine recently. The article is called "Beyond GDP: Get Ready for a New Way to Measure the Economy." I encourage you to read the article.