# GDP, Est’d GDO, GDP+

With the second release for GDP, we have the following picture of aggregate output:

Figure 1: GDP (black), GDPNow nowcast of 2/27 for GDP (light blue square), GDP+ scaled to 2019Q4 (red), GDO (blue), GDI (tan), all in bn.Ch.2017\$ SAAR. 2023Q4 GDI, GDO based on assuming 2023Q4 enterprise surplus is the same as 2023Q3. Source: BEA, Philadelphia Fed, Atlanta Fed, and author’s calculations.

The expenditure side measure of “Y” (as I would tell my macro students) continues to be estimated above the income measure. Note that we really don’t know GDI and GDO for 2023Q4, as enterprise surplus is unknown. I have guesstimated GDI and GDO assuming enterprise surplus is constant in nominal terms going from Q3 to Q4. Under this assumption, GDI continues to grow in Q4.

What about final sales, a better measure of aggregate demand? This continues to grow as well.

Figure 2: Final sales (blue, left scale), GDPNow nowcast of 2/27 for final sales (light blue square, left scale), final sales to domestic private (tan, right scale), all in bn.Ch.2017\$ SAAR. Source: BEA, Atlanta Fed, and author’s calculations.

In Q4, final sales to private domestic purchasers (which some observers take as a better measure of momentum) is 2.8% q/q AR, compared to GDP growth of 3.2%. Hence, momentum in aggregate demand seems strong. For Q1, GDPNow indicates the same growth rates for Q1…

As an aside, note there is no two consecutive decline in GDP+ in 2022H1, and only one quarter decline in GDI. Neither measure of final sales indicate a two-consecutive quarter decline.

## 40 thoughts on “GDP, Est’d GDO, GDP+”

1. joseph

“The expenditure side measure of “Y” (as I would tell my macro students) continues to be estimated above the income measure.”

And getting wider. We live in strange times. This pandemic shock has played havoc with all sorts of metrics and required rethinking what they tell us.

2. Macroduck

Revisions included less inventory accumulation, which is a plus for GDP in coming quarters.

The Atlanta Fed’s GDPNow estimate for Q1 is currently at 3.2%. The NY Fed’s Nowcast is at 2.8%. So we’re looking at 7 straight quarters of above-trend growth. Despite that good growth, the GDP deflator rose at a 1.6% pace (SAAR), the PCE deflator at just 1.8%, and the core PCE deflator at 2.1%.

Pretty sweet.

1. Ithaqua

Unfortunately, as JohnH will soon tell us, those inflation numbers may cause the Fed to cut interest rates, causing bond prices to rise and, consequently, seriously damaging the lives of all those poor and middle-class people who are heavily invested in the bond market. /s

Seriously, though, this is great news and hopefully is trickling into the consciousness of voters who haven’t already made up their minds about the Nov. elections…

1. baffling

and what ponzi Johnny won’t admit, is that poor people do not own bonds. wealthy people own bonds. poor people have debt.

2. JohnH

Funny…it’s pgl who’s been calling for rate cuts under the slightest pretext, not me. Ithaqua is very, very confused.

And no one has yet explained to me why it is so terrible that people get positive real after-tax returns when they are living on fixed incomes, trying to save for retirement, for their HSA accounts, or for their 529 college education accounts…particularly when the first thing that happens after a rate cut is that stock market prices spike, and the top 10% get a huge windfall…manna from heaven.

And no one has yet explained to me why those eagerly promoting rate cuts refuse to promote making automatic stabilizers more robust, like the highly successful fiscal programs implemented (after a long delay) during the COVID recession. Could it be attributed to the fact that the first to benefit would be the neediest among us?

1. Ithaqua

Reading comprehension not so good these days? I never claimed that you were calling for rate cuts at all! Note that “Unfortunately” at the start of the very first sentence!

You also seem under the odd impression that HSA accounts, 529 accounts, and IRAs are all invested in bonds, not stocks. Those stock market price spikes helped my IRA and 529 accounts for sure. If you want to invest only in bonds, despite massive research showing that bond returns are lower, that’s on you. Also, what happens when nominal rates fall? Bond prices go up, meaning bond portfolios become immediately more valuable. What’s wrong with that?

2. Macroduck

You have misconstrued what Ithaqua wrote, of course. He didn’t say you cheer for cuts. Only that you’d get the effect of cuts backward. That’s an entirely credible guess.

And nobody owes you an explanation of some new cracked comparison between two policy options that you’ve cooked up to pretend that one option isn’t worth considering.

And you lied when you said nobody has addressed your silly objection. I have.

3. baffling

“And no one has yet explained to me why it is so terrible that people get positive real after-tax returns when they are living on fixed incomes, trying to save for retirement, for their HSA accounts, or for their 529 college education accounts”
actually ponzi Johnny, this has been explained to you already. I have a 401k. I have a 529. no HSA account, however. I have some fixed income. my 401k and 529 are invested in stocks, not bonds. so those saving for retirement are in the same boat-stocks and not bonds. people with money in 401k and 529 keep it in stocks, not bonds. you seem to be ignorant of that fact Johnny.
but exactly what economic theory do you subscribe to, ponzi Johnny, where you would expect higher rates of return on risk free assets? that is certainly not a capitalist system. sounds like a theory of communism. you know, the one that failed with the Soviet Union, Cuba, Yugoslavia, etc. you seem to be illiterate to modern understanding of economics Johnny. because your arguments are not based on reality.

4. pgl

“And no one has yet explained to me why those eagerly promoting rate cuts refuse to promote making automatic stabilizers more robust”

I’m not the one who opposes using fiscal stimulus to offset recessions. You are. Then again you are both a two faced liar and dumber than a retarded rock.

3. Bruce Hall

Apparently, the continued war in Ukraine is great news for the US economy.

https://www.wsj.com/economy/ukraine-war-europe-american-economy-654ca41b

The U.S. is benefiting from European spending on jet fighters. Photo: bo amstrup/Agence France-Presse/Getty Images
Proponents of support for Ukraine usually invoke U.S. strategic interests or moral obligations. Lately, they are making a more calculating case: It is good for the economy.

In the two years since Russia invaded Ukraine, the U.S. defense industry has experienced a boom in orders for weapons and munitions. Business is coming from European allies trying to build out their military capabilities as well as from the Pentagon, which is both buying new equipment from defense manufacturers and replenishing military stocks depleted by deliveries to Ukraine.

1. pgl

“Come on wall street don’t be slow
why man this war is a go-go
there’s plenty good money to be made by
supplying the army with the tools of its trade
let’s hope and pray that if they drop the bomb,
they drop it on the Viet Cong”

Since they banned little Brucie boy from Woodstock – let’s inform him this was Country Joe McDonald

2. Ithaqua

I wouldn’t phrase it that way. I’d say, “Apparently, Putin’s often-declared intent to expand the Russian empire to the old boundaries of the U.S.S.R., combined with his evident willingness to invade neighboring countries to achieve that goal (as demonstrated by his invasion of Ukraine,) has caused Europe to ramp up defense spending in response. This is good for manufacturers of NATO-compatible military equipment, many of whom are U.S. companies.”

3. Macroduck

This issue keeps coming up. There is no question that war burns through war materiel, and that replacing it costs money and drives some production. Does it amount to “great news for the U.S. economy”? Here’s the picture:

https://fred.stlouisfed.org/graph/?g=1hCjh

Military spending is as a share of U.S. GDP has barely budged during Russia’s war on Ukraine, at the lowest level since WWII. Since we have been over this before, I have to wonder why anyone – you in particular, Bruce – would make this mistake again.

1. Bruce Hall

Macro, it depends on how you look at the situation. If you focus narrowly on US military spending, then the argument is that this is not an “investment” for the future or an addition to the US economy, but simply a cost for the present. But the premise of the articles (linked) was that the US defense industry was booming (pun) because of the need by European countries to upgrade their weaponry and munitions. In the latter view, the US is siphoning money from Europe and resulting in a stronger US economy (GDP growth).

Regardless, the activity does contribute to GDP through increased defense industry production whether you are for or against such spending. The flip side is that it does increase US national debt to replace our military stocks and potentially weakens military readiness because of insufficient stocks.

1. Anonymous

Exports do contribute to GDP “growth”.

Military equipment exports do not cover the drag on the US economy from cost overruns on things like F-35 (largest, but common to most) for one recent example.

Also, F-35 (not unique to this) buyers enjoy “co-production” which is uncompensated transfer of US tech funded by the US taxpayer. Final drag (I have seen) is foreign sales do not price in return/payment (recoupment) for the taxpayers’ investment in the weapon sold.

On surface net gain for GDP, peal the onion….

As Smedley Butler said of the inter WW “wars”: ” war is a racket”.

2. Macroduck

So, while you continue to ape Glenn Beck’s “I’m just pointing things out” schtick, you’re arguing both sides. Either we run into shortages or we run up the debt. Eithebwe help our allies, or we don’t. This is what happens when our adversaries to misbehave. We eithenrespond, or capitulate and allow them to threaten our allie an interests with no response from us. That’s the choice. So, do we abandon an ally or len the ally assistance? Choose one, an don’t pretend either choice is costless.

And however you choose to answer, the data are clear that whir military spending make sor contribution to ourput growth, that contribution is historically small. You wrote “great news”. That’s clearly an exaggeration.

3. pgl

“The flip side is that it does increase US national debt”

Brucie gets the basic accounting wrong. When a US company sells weapons to the European allies who are doing the bulk of supporting Ukraine, that does not add to the national debt as that is called an export. I would most people get that but not little Brucie boy.

4. pgl

“it depends on how you look at the situation.”

Hey Mr. Magoo – look at the chart he produced. Damn – you are dumber than a retarded dog.

4. JohnH

What’s funny is that the echo chamber here decries Russian military Keynesianism, but has absolutely no problem with Biden’s!

“The Biden administration’s sales pitch for the purported benefits of military outlays began in earnest last October, when the president gave a rare Oval Office address to promote a \$106-billion emergency allocation that included tens of billions of dollars of weaponry for Ukraine, Israel, and Taiwan. MAGA Republicans in Congress had been blocking the funding from going forward and the White House was searching for a new argument to win them over. The president and his advisers settled on an answer that could just as easily have come out of the mouth of Donald Trump: jobs, jobs, jobs. ”
https://www.thenation.com/article/economy/military-spending-isnt-the-economic-galvanizer-you-think-it-is/

Scoop Jackson, the Senator from Boeing, was Biden’s role model. “Like Scoop Jackson, Joe Biden is an over-eager and uncritical enthusiast for military Keynesianism—the use of arms spending to fuel economic growth. The ideal of Cold War liberalism was to fuse foreign and domestic policy, creating an integrated warfare/welfare state. Jackson, who became known as “the senator from Boeing” for his ardent support for the airplane manufacturer—a major employer in Washington State—was the leading exponent of the idea that lavish government funding of armament production was the best path for creating a large unionized workforce force and a robust domestic manufacturing sector.”
https://www.thenation.com/article/politics/biden-henry-jackson-cold-war-liberalism/

“Shares of the biggest defense companies, which have handily beat the benchmark S&P 500 stock index for the last two years, are expected to keep rising, according to Wall Street estimates.” https://www.reuters.com/business/aerospace-defense/wars-raise-profit-outlook-us-defense-industry-2024-2023-12-18/

Could this be why humanitarians like Ducky and pgl, are opposed to negotiations to stop the war in Ukraine? It seems that for some strange reason they want the meat grinder to continue…under the guise of defending Ukrainians!

But the

1. Ithaqua

To answer your question – it could be, but it isn’t. The real reason is to defend Ukrainians, and by extension Western Europe, from a barbarian invasion. Try reading my comment above; maybe you’ll learn something about the history of the war in Ukraine, e.g., that Russia launched an unprovoked invasion.

2. Macroduck

You truly are despicable. You have avoided ever saying a single bad thing about Putin’s militarism. I have objected to U.S. support for Israel’s war, for the U.S. wars in Iraq and Vietnam. You keep pretending the U.S. is fighting in Ukraine, leaving others to correct your deception. Then you engage in further dishonesty, as you just have.

Ukraine has asked for our help to resist Putin’s invasion. We were giving it until Trump induced lapdog Republicans to avoid voting on the issue, as they have avoided voting on border enforcement and, solar, on a budget to keep the government running.

You have not “yet explained to me why you are so eagerly promoting” the policies of Trump and Putin. C’mon, Johnny, you shamelessly demand explanations of all kinds of nonsense from others. How about, just this once, you explain why you sound like an authoritarian is progressive clothing.

1. Menzie Chinn Post author

Macroduck: As far as I can tell, JohnH is for all things Putin. I’ve not seen him once come close to condemning the killing of Navalny, nor of kidnapping children in the Ukraine, etc.

2. JohnH

“Roughly 70% of Americans want the Biden administration to push Ukraine toward a negotiated peace with Russia as soon as possible, according to a new survey from the Harris Poll and the Quincy Institute, which publishes Responsible Statecraft.”
https://responsiblestatecraft.org/ukraine-peace-talks-poll/

But the neocon echo chamber here wants the meat grinder to continue, even though it’s increasingly looking like a lost cause, yet another pointless and futile war. But it is very profitable for the merchants of death.

1. baffling

if Russia immediately implemented a ceasefire and withdrew from Ukraine, the “meat grinder” would be over. this would stop the war and death immediately. this is a valid solution. ponzi Johnny, would you be happy with this peace? are you in favor? or would you be against such a peace proposal. simple answer, yes or no. I don’t care about any of your alternatives, I want a direct yes or no answer on this peace plan to stop the meat grinder Johnny.

2. Noneconomist

Who started this pointless, futile war? Who invaded whom? Who could end this meat grinder today, saving his own soldiers as well as those on the other side? Who is demanding 20% of the country he’s invaded and terrorized?
You can stop pretending you actually care about ANY of this. But we know you won’t. He who speaks with forked tongue will continue because he’s not smart enough to realize he’s a continuing joke—an unfunny one—in these posts.
You moved way beyond the tangled web some time ago.

3. Noneconomist

Why do you, JH, continue to refuse to support a Russian withdrawal? Given numerous chances, why have you continually refused to condemn the Russian invasion? Why do pretend to be anti war while never condemning the thousands of Ukrainians needlessly slaughtered? Why do you insist on negotiations that would force Ukraine to relinquish 20% of the country? Why are you so sensitive of criticisms of Russia and Putin? Given the accolades you’ve showered on Russia and China, what does your continued cheerleading for totalitarian governments say about you?
You’re beyond fooling anyone here. Except , of course, yourself.

1. Anonymous

Nonecon,

Do you think Putin, worrying about Ukraine being base for NATO, should act differently than JFK in the Cuban Missile crisis?

Walk a kilometer in your enemy’s brogans.

1. baffling

the usa did not invade Cuba and slaughter the innocent civilians. Russia did. so this is not remotely the same. jfk successfully kept Russian missiles out of Cuba. Putin’s actions are a guarantee that nato missiles will be in Ukraine before long. Russia stood a better chance of negotiating to keep those missiles out of Ukraine had it not invaded. the invasion has guaranteed those missiles arrive once a ceasefire is reached. at that point, any new incursion will be on nato soil. I don’t want to walk in Putin’s shoes, they are covered in dog sh!t.

2. Noneconomist

Refresh my memory, Anon. When did JFK order US forces to invade Cuba, sack the island and murder thousands of Cuban women and children in the process? When did we capture, imprison, and poison Castro —and other Cuban leaders—while returning Batista to power? When did we remake Cuba into the capitalist paradise it isn’t today? What were our demands during the invasion? Which 20% of the island did we insist become part of the US?
Getting into historical comparisons is obviously not in your wheelhouse. Or your undersized and ill fitting brogans either.

5. pgl

“Canada and the European members of the North Atlantic Treaty Organization, which make up the bulk of NATO’s membership, spent 11% more on defense in 2023 than the previous year.”

Let’s pose an example where Canada spends an extra \$10 billion in buying goods for Ukraine which will be produced by a US company. Maybe we will add to this example that Germany spends an extra \$50 billion in buying goods for Ukraine which will be produced by a US company. Assume a Keynesian multiplier = 2 and a US marginal tax rate = 0.25. Predict the effect on US GDP and the government deficit.

Now it is sort of obvious that US GDP would rise by \$120 billion. Even a MAGA moron like Brucie gets that. But the deficit? Let’s see tax revenues rise by \$30 billion. Now anyone with half a brain would say that this rise in EXPORTS DECREASES the deficit by \$30 billion.

But not little Brucie boy who would answer that the deficit would rise by \$30 billion as this MAGA moron thought US government purchases rose by \$60 billion in our example. Yea – Brucie is indeed that dumb.

4. pgl

“As an aside, note there is no two consecutive decline in GDP+ in 2022H1, and only one quarter decline in GDI. Neither measure of final sales indicate a two-consecutive quarter decline.”

The Kudlow approach would be to take whichever metric gave the worst news since we have a Democrat in power. That also seems to be the approach of Princeton Steve, Bruce Hall, and JohnH.

1. JohnH

Still yammering about the ambiguity of the 1H22 recession/no recession! Hilarious how much time and effort was being wasted (and is still being wasted) on the issue, when the real headline was that the economy was borderline recession.

I mean, what a tempest in a teapot! The difference was a few tenths of a percent and the official numbers were going to be revised anyway…until final numbers got released.

And people wonder why I make comments about economists’ obsession with GDP. You would think they would have more important things to do, but I guess not.

1. Menzie Chinn Post author

JohnH: It’s a couple of lines at the end of post, and provides (still) a cautionary tale regarding over-interpreting data that will be revised.

2. baffling

“when the real headline was that the economy was borderline recession.”
no. you wanted to argue for recession or borderline recession. the rest of the world understood that was inaccurate. and as a matter of fact, the data points it out. nobody in their right mind would consider that time period as recessionary. not even close. just propaganda on your part, ponzi Johnny.

3. Noneconomist

Well, JH, given the verbal spankings and countless corrections you receive , people honestly wonder why you continue to comment on subjects you know little about. Yet—because of inflated ego—you still yammer on and on…and on. You’d think, given that ego and the narcissism accompanying it, you’d have more important things to do. Guess not.

2. Bruce Hall

pgl, I’m not sure that I’ve been commenting about the “worst news”. But I do take some of the White House rhetoric with a block of salt.

1. Pgl

You want me to comment on a question that you not had the courage to pose? Brucie boy is a gutless little xoward but he needs someone to come play with him. No thank you

5. pgl

JohnH does it again – finds a term that was introduced some 70 years ago by E. Cary Brown’s 1954 paper on fiscal policy. Jonny boy pretends he is the only one discussing this idea (which I doubt little Jonny boy even gets). I thought I’d offer this excellent research paper from 24 years ago, which I doubt little Jonny boy ever read as this lazy troll has trouble going back 24 seconds:

https://pubs.aeaweb.org/doi/pdf/10.1257/jep.14.3.37

The Significance of Federal Taxes as Automatic Stabilizers, Alan J. Auerbach and Daniel Feenberg, Journal of Economic Perspectives—Volume 14, Number 3—Summer 2000

Yes Claudia Sahm has provided some important research and her 17 minute talk was worth listening to. Of course we know Jonny boy did not listen to the last 3 minutes even if he provided a link. You see – Sahm noted the reasonable proposition that in the face of the Great Recession we need much larger fiscal stimulus both in the US and UK, which of course contradicts the stupid praise of Cameron’s fiscal restraint little Jonny boy has been cheerleading for almost a decade. Then again little Jonny boy has this habit of massively contradicting himself on almost every issue. But little Jonny boy is too dumb to get his pure insanity.