Why Watch GDP

I use GDP to track how the US is doing relative to other countries. I believe our prosperity depends on our individual actions and our productivity and we are wired to be self-supporting. Our individual actions can include electing the wrong leaders or electing the right leaders. Our prosperity is also determined by our natural resources, property rights, water, arable land and rule of law minus theft, crime, corruption and really dumb ideas like Climate Change and Open Borders.

US GDP Statistics and How to Use Them

The Five GDP Statistics You Need to KnowBY KIMBERLY AMADEO, 1/5/19.

Gross domestic product measures a country's economic output. There are five GDP statistics that give you the best snapshot of the health of the United States economy. U.S. GDP is the most important economic indicator because it tells you the health of the economy. The U.S. debt to GDP ratio describes whether America produces enough each year to pay off its national debt. U.S. real GDP corrects for changes in prices. The GDP growth rate measures how fast the economy is growing. U.S. real GDP per capita describes the standard of living of Americans.

The table below shows five ways to measure the United States economy.

1. U.S. GDP - U.S. GDP was $20,658,200 in the third quarter of 2018. What exactly does this mean? The gross domestic product of the United States ran at a rate of $20.658 trillion a year from July through September 2018. This statistic is also known as nominal GDP. The U.S. Bureau of Economic Analysis provides this estimate in the National Income and Product Accounts Interactive Data, Table 1.1.5. Gross Domestic Product.

U.S. GDP is the economic output of the entire country. It includes goods and services produced in the United States, regardless of whether the company is foreign or the person providing the service is a U.S. citizen. To find out the total economic output for all American citizens and companies, regardless of their geographic location, you'd want to look at U.S. gross national product, also known as gross national income.

There are four components of GDP:

1.    Personal Consumption Expenditures: All the goods and services produced for household use. This is almost 70 percent of total GDP.

2.    Business Investment: Goods and services purchased by the private sector.

3.    Government Spending: Includes federal, state and local governments.

4.    Net Exports: The dollar value of total exports minus total imports.

2. Debt to GDP Ratio - The U.S. debt-to-GDP ratio for Q3 2018 is 104 percent. That's the $21.516 trillion U.S. debt as of September 28, 2018, divided by the $20.658 trillion nominal GDP. Bond investors use it to determine whether a country has enough income each year to pay off its debt. 

This debt level is too high. The World Bank says that debt that's greater than 77 percent is past the "tipping point." That's when holders of the nation's debt worry that it won't be repaid. They demand higher interest rates to compensate for the additional risk. When interest rates climb, economic growth slows. That makes it more difficult for the country to repay its debt. The United States has avoided this fate so far because it is one of the strongest economies in the world. 

If you review the national debt by year, you'll see one other time the debt-to-GDP ratio was this high. That was to fund World War II. Following that, it remained safely below 77 percent until the 2008 financial crisis. The combination of lower taxes and higher government spending pushed the debt-to-GDP ratio to unsafe levels. Even though the economy is growing at a healthy 2-3 percent rate, the federal government has not reduced the debt. It keeps spending at an unsustainable level.

3. Real GDP - U.S. real GDP was $18.665 trillion for Q3 2018. This measure takes nominal GDP and strips out the effects of inflation. That's why it's usually lower than nominal GDP. 

4. GDP Growth Rate - The current GDP growth rate was 3.4 percent for Q3 2018. This indicator measures the annualized percent increase in economic output since the last quarter. It's the best way to assess U.S. economic growth. 

It's the best statistic to compare U.S. output year-over-year. That's why the BEA uses it to calculate the GDP growth rate. It's also used to calculate GDP per capita.  The BEA provides this date in the NIPA charts, Table 1.1.6. Real Gross Domestic Product, Chained Dollars.

If you look at U.S. GDP history, you'll see this not a sustainable rate of growth.  The ideal growth rate is between 2-3 percent. Beyond that, the economy could enter a dangerous boom and bust cycle. The outlook for 2018 and beyond is within this healthy range. That could change if the above-average growth continues.

5. GDP per Capita - For Q3 2018, the U.S. real GDP per capita was $56,803. This indicator tells you the economic output by person. It's the best estimate of the standard of living.

To compare the per capita GDP between countries, use purchasing power parity. It levels the playing field between countries. It compares a basket of similar goods, taking out the effects of exchange rates. In 2017, the United States ranked 20th compared to other countries.

https://www.thebalance.com/u-s-gdp-5-latest-statistics-and-how-to-use-them-3306041

Comments

Most of the data displaying “Real GDP” I’ve seen has been higher than the Nominal GDP data and it has been called PPP GDP.  I prefer to watch Nominal GDP as an untampered-with number.

In the US, our $20 trillion GDP includes the $6 trillion collected in taxes and spent by federal, state and local governments.  That would leave $12 trillion for the Private Sector to earn enough money to support the economy. But a good part of that $12 trillion is spent complying with government laws and regulations. 

US Healthcare costs in 2018 was $3.5 trillion. The cost of education in the US is over $3 trillion when you count all the pieces. K-12 public schools cost over $1 trillion a year when you add property taxes and government subsidies.  College costs also cost over $1 trillion a year when you add all the costs of public and private colleges. If you subtract the $8.5 trillion in these costs, we are left with $3.5 trillion to keep the free market economy alive.

We pay our bills with borrowed money.  The US National Debt is $21 trillion, the US Household Debt is $13.5 trillion. US Corporate Debt is $15 trillion. US Student Loan Debt is 1.5 trillion. US Auto Loan Debt is $1.1 trillion. US Government Unfunded Liabilities are $210 trillion. Global Debt is $247 trillion.  We are Lemmings heading for the cliff to drown in a sea of debt.

The only good debt is US Mortgage Debt at $13.3 trillion.

We should be busy reducing our Debt. If we are smart enough to do this, we will see GDP decline a little because we would be spending our money to pay down our debt and won’t be spending money on “stuff”.

Norb Leahy, Dunwoody GA Tea Party Leader