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Real GDP and GDI data from the BEA, chart by MIsh

Chart Notes

• Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing. GDP measures the value of products produced, and income measures income from sales.
• The numbers are seasonally adjusted and annualized.
• Real means adjusted for inflation.
• The difference between Real GDP and Real Final Sales is a BEA estimate changes in private inventory (CIPI). Inventory nets to zero over time so Real Final Sales is the bottom line estimate of GDP.
• The GDP and GDI numbers should match and do correlate over time. But the difference between the measures is stunning as the next chart shows.

Key Contributions to GDP

• PCE Goods: 0.85
• PCE Services: 1.06
• Non-Residential Fixed Investment: 0.26
• Residential Fixed Investment: 0.04
• Change in Private Inventories: 0.07
• Exports 0.68
• Imports -0.25
• Federal Government: 0.16
• State and Local: 0.40

Personal Consumption Expenditures (PCE)

The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were food services and accommodations as well as health care. Within goods, the leading contributors to the increase were other nondurable goods (led by pharmaceutical products) and recreational goods and vehicles (led by computer software).

Government Spending

The increase in state and local government spending primarily reflected increases in compensation of state and local government employees and investment in structures.

Within federal government spending, the increase was led by nondefense spending.

Exports, Fixed Investments, Other

Within exports, both goods (led by petroleum) and services (led by financial services) increased.

The increase in nonresidential fixed investment reflected increases in intellectual property products, structures, and equipment.

GDP and GDI in Billions of Dollars

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GDP vs GDI Discrepancy

• Since the third quarter of 2022, GDP rose from 21,851 to 22,673. That’s a gain of 3.8 percent.
• Since the third quarter of 2022, GDI fell from 21,981 to 21,949. That’s a decline of 0.1 percent, but the fourth quarter of 2023 is not yet available.

Unless there is a huge jump in income in the fourth quarter of 2023, the already huge discrepancy will widen.

Instant Gratification

The discrepancy between GDP and GDI is ongoing and massive. That should bear attention. But it doesn’t and won’t.

People like the instant gratification that comes with the initial release of GDP, whether it is positive or negative. But GDI is only released in later revisions.

Debt Soaring Out of Sight

GDP is fueled by both consumer debt and government debt. Regarding government debt, Republicans are in on the deal.

For example, The GOP Supports a Child Tax Credit Boost and Affordable Housing Expansion

Without passing anything but continuing resolutions, we went from a House Speake Kevin McCarthy’s proposal of $1.471 trillion bill to Mike Johnson’s $1.66 trillion bill that does not include, Ukraine, Israel, or the US border with Mexico.

Fueled by Debt

Total consumer credit, revolving credit, and credit card interest rates all hit new record highs in November.

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Consumer credit data from the Fed, chart by Mish

Consumer Credit Hits Record $5 Trillion

For discussion, please see Retail Sales Surge 0.6 Percent, Beating Economist’s Expectations

Consumers keep spending more and more, and much of that spending is online.

Also see How Did Covid Change Your Propensity to Buy Things Online?

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