U.S. Economic Activity Jumps Sharply in Second Quarter 2014

Paul Dykewicz

Mark Skousen

Washington, D.C. — Gross Output (GO), a broadened measure of U.S. economic activity, advanced to nearly $30.9 trillion in the second quarter of 2014, a 4.8% annualized jump in real terms, the Bureau of Economic Analysis (BEA) reported today.

Gross Output, a measure of sales or receipts of all industries throughout the production process, includes business to business transactions, in contrast to Gross Domestic Product (GDP), which did not advance as strongly during the second quarter. GDP, which measures the value of final goods and services only, rose a slightly less robust 4.6% in real terms to reach $17,328.2 billion during the second quarter.

“The GO data demonstrates that the economy recovered sharply from the slowdown in the first quarter,” said Mark Skousen, PhD, editor of Forecasts & Strategies, who champions Gross Output as a more comprehensive measure of economic activity than GDP. He first introduced Gross Output as a macroeconomic tool in his book, “The Structure of Production,” (New York University Press, 1990). The BEA now publishes GO on a quarterly basis in its “GDP by Industry” data.

“Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and demonstrates that business spending is booming and is more significant than consumer spending,” Skousen said. “By using GO data, we see that consumer spending is actually less than 40% of economic activity, not the 70% figure that is reported by the media.”

During economic downturns, Skousen said GO tends to fall faster than GDP. But during periods of economic expansion, GO rises faster than GDP, he added.

Skousen explained that GDP leaves out a big part of the economy, particularly business-to-business transactions in the production of intermediate inputs. He calculated that business intermediate expenditures (IE) jumped an annualized rate of 20% to $21.4 trillion in the second quarter.

“That’s good news for the economy and the stock market,” said Skousen, who former Republican presidential candidate Steve Forbes recently wrote should receive Nobel Prize consideration for promoting the use of the Gross Output statistic for the past several decades.

Forbes magazine featured two write-ups that bought attention to Skousen and the Gross Output statistic that he favors for economic analysis. The following commentaries address Gross Output (GO), Intermediate Expenditures (IE) and their relationship to GDP.

Steve Forbes wrote an April 14 column, “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal.”

Mark Skousen’s Forbes magazine op-ed appeared December 16, 2013, with the headline, “Beyond GDP: Get Ready For A New Way To Measure The Economy.”

In addition, the Wall Street Journal published a Skousen commentary about GO as a lead editorial on April 23, 2014, “At Last, a Better Economic Measure.”

Skousen’s monthly investment newsletter, Forecasts & Strategies, uses his unique background as a free-market economist to make investment recommendations for his subscribers. He also writes three weekly subscription-based trading services and posts regular commentaries focused on economics, investing and politics at www.MarkSkousen.com.

To accommodate increased media attention about his pioneering work with the Gross Output statistic, Skousen has made an unusual move for an economist by retaining a press representative, Valerie Durham, reachable by phone, 1-410-570-0535, and email, vdurham@skousenpub.com, to handle inquiries.

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