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United States September 2012 GDP Analysis

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The Bureau of Economic Analysis provides news releases at every quarter in the United States (McCaffery and Jones 48). This analysis is on the last Gross Domestic Product of the second quarter that marks the third estimate. It gives an analysis of the corporate profits of the second quarter that present the amended estimates.

Real gross domestic products represent the measure of the country’s economic activity. Its calculation is by adding the totals of a country’s annual output of its goods and services. It is the monetary value of the goods produced in a country in a period of one year (Brezina 4). It is the most fundamental measure of a nation’s economic performance. To measure GDP, we add up the consumption expenditures, investment spending, government spending, and net exports (Mankiw, 2011, 494). The Bureau of Economic Analysis uses GDP to measure United States economic performance. In the current release, the bureau used the production of goods and services that labor and possessions found in the United States produced. It showed an improvement for the annual rate of 1.3 percent from the opening quarter to the subsequent quarter in the year 2012. This is as per the third estimate that the Bureau of Economic Analysis had released. In the first quarter, the increase in the real GDP was 2.0 percent. The estimates that the Bureau released on September 27 2012 whose basis was on data source that was complete. This came as a result of the availability of data at this release than at the last release.

An increase in GDP in the second quarter is a clear reflection of the positive contribution that emanate from exports, residential fixed investment, personal consumption expenditures (PCE), and the non residential fixed investments. Local government expenditure and private inventory investment’s negative contributions offset these. However, the imports increased, and it is a clear indication of increased demand for foreign goods in the United States.

Deceleration in real GDP occurs when a country fulfils the following conditions. These conditions ought to be fulfilled for at least in the last three consecutive years. The first condition assumes that the forward four-year moving average growth minus the backward four-year moving average growth rate is less than zero. Second, the forward four-year moving average growth rate is below the country’s growth rate. The third and last assumption is that the forward four-year moving average GDP per capita is below the backward four-year moving average (International Monetary Fund, 2010, 48). On a closer perspective, the decreases in real GDP reflect the decelerations in the personal consumption expenditures (PCE), residential fixed investment, and the non-residential fixed investments. These were offset partly by a smaller decrease in the federal government spending both at the local and national level coupled with acceleration of the exports.

Real price index for domestic purchases is a measure of the price paid for goods and services that the United States citizens purchase. The United States Bureau of Economic Analysis derives this index from the prices of personal consumption expenditures, government consumption expenditures, gross domestic investment, and gross investment. This means that it is different from the gross domestic product price index as it keeps out price changes in export of goods and services but includes changes in the price of imports of goods and services (Social Science Dictionary, 2008). The price index for gross domestic purchases improved by 0.7 percent in the second quarter. This was lower than the previous quarter by 0.1 percent reflecting a lower price paid in the second quarter (U.S Bureau of Economic Analysis, 2012).

Real personal consumption expenditures show the value of foods and services that residents consume. It is the spending by individuals on goods and services. This excludes the purchases of new homes. These goods include the spending on durable goods like automobiles and electronic appliances, and non-durable goods such as clothing and food. The services in this case include spending on intangible items like education and medical care (Mankiw, 2011, 497). The real PCE increased by 1.5 percent in the second quarter. The consumption of durable goods also fell by 0.2 percent while that of non-durable goods increased by 0.6 percent. In addition, the expenditures on services increased by 2.1 percent. This reflects the changing preferences of people with regard to durable and non-durable goods.

Real nonresidential fixed investment constitutes the purchases of equipment, software, and non-residential structures. The residential structures include the new homes and household investment spending (Mankiw, 2011, 498). There is an increase of 3.6 percent on the real nonresidential fixed investment in the second quarter. The real residential fixed investment showed an 8.5 percent increase.

The exports and imports of goods and services also showed an increase in the second quarter. The real exports and imports of and services increased at 5.3 percent and 2.8 percent respectively. This shows increases in exports and import expenditures.

Real federal government consumption expenditures constitute the government expenditures and spending. These are in terms of budgetary allocation to government departments or the government-supported institutions and programs that the federal government sponsors both at the national and local level (The Economist, 2012, 22). These are gross investments and government consumption expenditures on public works. This does not include the transfer payments. The real gross investment and federal government expenditures decreased by 0.2 percent. This is a mark of the cuts in government expenditures in some of its programs. National defense also shows a decrease of 0.2 percent. This is an indication of a cut in the budgetary spending in the government’s larger spending department. On the other hand, the real gross investment and state and local government consumption expenditures show a 1.0 percent decrease. Thus, the second quarter statistics indicate a decrease in government purchases. The second quarter also shows an increase in the real private inventories by $41.4 billion. This follows an increase in the first quarter by $56.9 billion and $ 70.5 billion in the fourth quarter. This shows increases in the investment spending among businesses.

Gross domestic purchases are the market value of goods and services that the United States residents buy regardless of where the production of these goods and services takes place. It is GDP less the exports of goods and services. This is equivalent to the sum of PCE, gross private domestic investment, and government consumption expenditures, and gross investments. This is because it excludes the prices that foreigners pay for US production and includes the prices of imports (Blades, and Lequiller, 2007, 335). In the second quarter, the real gross domestic purchases showed an increase of 1.0 percent (U.S Bureau of Economic Analysis).

Gross national product is a measure for a country’s economic performance by adding the incomes earned by the citizens of the country irrespective of where they work in the world. This is done by adding the income earned by residents from foreign investments and subtracting the incomes earned by foreigners living in the United States. It is goods and services that the residents produce using their labor and property. In the second quarter, the real gross national product increased by 2.1 percent. This included the net receipts of incomes from abroad which increased by $27.4 billion (U.S Bureau of Economic Analysis, 2012).

Gross domestic income presents the sum of all income from production of goods within a country. It measures the total income payable in the Gross Domestic Product income accounts. It is the sum of the employee compensations, the gross operating surplus, taxes, gross mixed income, less the subsidies on production and imports. Another way of measuring GDI is through adding rental income, profits, interest income, wages, and the statistical adjustments (Investopedia). These statistical adjustments often include the corporate income taxes, undistributed profits, and dividends. The US Bureau of Economic Analysis measures GDI as the costs incurred and the income accrued in GDP production. This increased by 0.2 percent in the second quarter. This is lower when compared with a 3.8 percent increase in the first quarter.

Table 1: Percentage Change of Real GDP, Current-dollar GDP, and Gross domestic purchases price index from the preceding quarter

 
Advance Estimate 
Second Estimate
Third Estimate
Real GDP
1.5
1.7
1.3
Current-dollar GDP
3.1
3.3
2.8
Gross Domestic Purchase Price Index
0.7
0.8
0.7

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