The National Income and Product Accounts (NIPA)pages.hmc.edu/evans/e53l1.pdfThe National Income and...

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(c) 2006-2014 Gary R. Evans. May be used for educational purposes only without permission of the author. The National Income and Product The National Income and Product Accounts (NIPA) Accounts (NIPA) Accounts (NIPA) Accounts (NIPA) Data source for all slides are from the Bureau of Economic Analysis unless otherwise indicated. See http://www.bea.gov for data sources.

Transcript of The National Income and Product Accounts (NIPA)pages.hmc.edu/evans/e53l1.pdfThe National Income and...

(c) 2006-2014 Gary R. Evans. May be used for educational purposes only without permission of the author.

The National Income and Product The National Income and Product Accounts (NIPA)Accounts (NIPA)Accounts (NIPA)Accounts (NIPA)

Data source for all slides are from the Bureau of Economic Analysis unless otherwise indicated. See http://www.bea.gov for data sources.

Topical: Natural Gas and Propane iprices soar ...

$5

$2

Source: Energy Information Administration, data are from reports released Jan 23, 2014.

... massive inventory drawdown due to record-setting cold weatherrecord-setting cold weather

The “polar vortex” in early January pushed temperatures in the East to record lows ...record lows ...

... which in turn caused a huge drawdown in seasonal natural gas inventories.

What I intend to show ...What I intend to show ...

1. This is a consumption-driven economy2. We import a lot more than we export3. Economic growth has been robust, about 3.5%

b t t i th l t f (2008 2013)• ... but not in the last few years (2008-2013).4. The bulk of national income is in wages and salaries5 We have become much more of a service (financial health5. We have become much more of a service (financial, health,

legal, education, insurance, etc.) economy and less of a manufacturing and agricultural economy (in terms of value

d d)produced).6. We don't save (at the personal level).

Refer to large printout of this same chart ...

Major Components of GDP: Major Components of GDP: 2013Q32013Q3((bbillions illions $, annualized data)$, annualized data)

3 137 5

-500.2 Total: 16,912.9 billion

2,738.0

3,137.5

11,537.7

2 000 0 0 0 2 000 0 4 000 0 6 000 0 8 000 0 10 000 0 12 000 0-2,000.0 0.0 2,000.0 4,000.0 6,000.0 8,000.0 10,000.0 12,000.0Net Exports Government Spending Investment Consumption

NIPA Accounts: 2013Q3GDP $16 9129 trillionGDP $16.9129 trillion

8,000.07,624.8Services

6,000.0

,

4,000.0 2,638.8

1 274 02,265.8 1,886.3

Nondurable goods

Durable goods

ExportsS&L Govt

0 0

2,000.01,274.0

935.8532.6 470.7

654.1

144 8

1,251.2

-2,000.0

0.0 144.8

Imports

Federal GovtEquipment and SoftwareResidential ConstructionNonresidential ConstructionIntellectual Property Products

-4,000.0

-2,766.0p y

Change in Business Inventories

These NIPA categoriesThese NIPA categories• Real GDP adjusts monetary GDP by removing inflation (the

data are deflated by statistics called the chain-type price indexes)indexes).

• Services include financial, health, recreational, transportation, housing, and education

• Consumer durables are "big ticket" goods like autos and furniture, often purchased with credit.R id i l i fl h l f h• Residential investment reflect the value of new home construction, so this spending in not included in consumption.

• Change in business inventories are small, may be positive orChange in business inventories are small, may be positive or negative, and are sometimes early indicators of recession when they grow, but deep in a recession can turn strongly negative.

di i b h i d i l d• Government spending in both categories does not include transfer payments like Social Security.

30

20The two The two primary primary problemsproblems

0

10problems problems areas in the areas in the recent recent

ii

20

-10recession recession (and key to (and key to recovery):recovery):

-30

-20

2006-I

2006-II

2006-III

2006-IV

2007-I

2007-II

2007-III

2007-IV

2008-I

2008-II

2008-III

2008-IV

2009-I

2009-II

2009-III

2009-IV

2010-I

2010-II

2010-III

2010-IV

2011-I

2011-II

2011-III

2011-IV

2012-I

2012-II

2012-III

2012-IV

2013-I

2013-II

2013-III

Durable Goods 17.4 -0.4 5.6 5.4 4.6 5.9 4.5 1.6 -10.9 -1.2 -11.7 -25.8 0.7 -2.4 20.6 -7 5.4 12.5 6.7 12.9 5.4 -0.8 5.2 13.5 9.8 2.9 8.3 10.5 5.8 6.2 7.9

Residential Construction -3.7 -18.6 -20.5 -17.4 -17 -15.1 -23.2 -29.3 -27.9 -16.4 -18.3 -33.3 -33.2 -21.9 21 0.3 -12.2 23.2 -30.7 7.9 1.7 2.7 6.1 12.2 23 5.7 14.1 19.8 12.5 14.2 10.3

-40

Data shown are annualized quarterly growth rates of durable goods durable goods and residential constructionresidential construction, 2006-I to 2013-III

The Statistical Difference Between GDP andThe Statistical Difference Between GDP andNational IncomeNational Income

(and don’t worry, you’re not required to know this)

Gross Domestic Productl R i t f iplus Receipts of overseas income

less Payments to overseas incomeequals Gross National Productless Consumption of Fixed Capitalequals Net National Productless Indirect Business Taxes and Tax Liabilityless Indirect Business Taxes and Tax Liabilityless Business Transfer Paymentsless Statistical Discrepancyplus Subsidies less current surplus of government enterprisesplus Subsidies less current surplus of government enterprisesequals National Income

National Income and its Disposition:National Income and its Disposition:20132013 Q3Q32013 2013 Q3 Q3

18%Wage and Salary Compensation

6%

Compensation

Proprietors income

53%9%

Rental income

Interest income

4%

9% Interest income

Dividend income

10% Government transfer benefits

Real GDP Growth: 1960Real GDP Growth: 1960--20122012

6

8

Average:

4

6 3.1%

2

0

2013 Q1 Q3: 1 1% 2 5% 4 1%

4

-22013 Q1-Q3: 1.1%, 2.5%, 4.1%

Below 0.0% for 2 consecutive quarters is a recession.-4

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: Bureau of Economic Analysis, National Income and Product Accounts

Significant Trends in Consumption

40

45

50 The growth of the service economy (health, financial, insurance, education, government, communication) and less of a goods economy ( f i il f d )

30

35

40 (manufacturing, textiles, food, etc.).

20

25

10

15

0

5

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Durable goods Nondurable goods Services

We don't We don't save (much)save (much)( )( )

12

14

Falling through the 80s and

Personal Savings as a % of Disposible Personal

Income

10

g g90s as we used credit cards, but then rising as credit cards were being paid down in

Income

6

8recession. This is a key "recovery" variable.

4

6

2Now at 3.6% in 2012 Q3

01980 1985 1990 1995 2000 2005 2010

About savingsAbout savingsgg• Personal savings is equal to gross personal savings less

new consumer debt (which explains how it can benew consumer debt (which explains how it can be negative)

• Personal savings quarterly turned negative for the first time in 2005.

• We have high levels of gross personal savings in the form of institutional savings 401Ks IRAs other retirementof institutional savings 401Ks, IRAs, other retirement vehicles, and fairly high discretionary savings by upper-income individuals.

• We have high levels of business savings in the U.S. and very high levels of "global savings" overseas.

• Teacher's initial comments on the connection between this• Teacher s initial comments on the connection between this and short-term recovery with long-term problems.

Certain conclusionsCertain conclusions

1. This is a consumption-driven economy2. We import a lot more than we export3. Economic growth has been robust, about 3.4%

• ... but much lower since 2005.4. The bulk of national income is in wages and salaries5 W h b h f i (fi i l5. We have become much more of a service (financial,

health, legal, education, insurance, etc.) economy and less of a manufacturing and agricultural economy (in terms of value produced).

6. We don't save (at the personal level).

What's nextWhat's next• You know that we are barely staying out of a

recession and you probably know that the fiscalrecession and you probably know that the fiscal and monetary stimulus package is huge.

• The total size of the stimulus package is about $2• The total size of the stimulus package is about $2-$4 trillion (depending upon what you count) so it will stimulate some!

• As we will see, the real issue will be the long-term financial cost and effect of this scale of borrowing gby the U.S. Government.

• Our next lecture will explore why these NIPA accounts cycle.

Additional information ...

“A Guide to the National Income and Product Accounts of the United States,” Bureau of Economic Analysis, Sept. 2006. Detailed description of NIPA accounts and appendix about how chain-price indexes are constructed. http://www.bea.gov/national/pdf/nipaguid.pdf

h d h l“Measuring the Economy: A Primer on GDP and the National Income Accounts,” Bureau of Economic Analysis, Sept. 2007. Has more about how to obtain the data. http://www.bea.gov/national/pdf/nipa_primer.pdf

“Taking the Pulse of the Economy: Measuring GDP,” Landefeld, Seskin, & Fraumeni, Journal of Economic Perspectives, Spring 2008. Detailed description of methods and NIPA classifications Available on the BEA site atof methods and NIPA classifications. Available on the BEA site at http://www.bea.gov/about/pdf/jep_spring2008.pdf

Table 1.1.5. Gross Domestic Product[Billions of dollars]Bureau of Economic Analysis % growth 2013

Line 2006 2007 2008 2009 2010 2011 2012 2013Q3 2012 % tot1 Gross domestic product 13,857.9 14,480.3 14,720.3 14,417.9 14,958.3 15,533.8 16,244.6 16,912.9 4.6 100.0%2 Personal consumption expenditures 9,297.5 9,744.4 10,005.5 9,842.9 10,201.9 10,711.8 11,149.6 11,537.7 4.1 68.2%3 Goods 3,235.8 3,361.6 3,375.7 3,198.4 3,362.8 3,602.7 3,769.7 3,912.8 4.6 23.1%4 Durable goods 1,156.1 1,184.6 1,102.3 1,023.3 1,070.7 1,129.9 1,202.7 1,274.0 6.4 7.5%5 Nondurable goods 2,079.7 2,176.9 2,273.4 2,175.1 2,292.1 2,472.8 2,567.0 2,638.8 3.8 15.6%6 Services 6,061.7 6,382.9 6,629.8 6,644.5 6,839.1 7,109.1 7,379.9 7,624.8 3.8 45.1%7 Gross private domestic investment 2,680.6 2,643.7 2,424.8 1,878.1 2,100.8 2,232.1 2,475.2 2,738.0 10.9 16.2%8 Fixed investment 2,613.7 2,609.3 2,456.8 2,025.7 2,039.3 2,195.6 2,409.1 2,593.2 9.7 15.3%9 Nonresidential 1,776.3 1,920.6 1,941.0 1,633.4 1,658.2 1,809.9 1,970.0 2,060.5 8.8 12.2%

10 Structures 415.6 496.9 552.4 438.2 362.0 380.6 437.3 470.7 14.9 2.8%11 Equipment 856.1 885.8 825.1 644.3 731.8 832.7 907.6 935.8 9.0 5.5%12 Intellectual property products 504.6 537.9 563.4 550.9 564.3 596.6 625.0 654.1 4.8 3.9%13 Residential 837.4 688.7 515.9 392.2 381.1 385.8 439.2 532.6 13.8 3.1%14 Change in private inventories 67.0 34.5 (32.0) (147.6) 61.5 36.4 66.1 144.8 81.6 0.9%15 Net exports of goods and services (762.4) (709.8) (713.2) (392.2) (518.5) (568.7) (547.2) (500.2) -3.8 -3.0%16 Exports 1,478.5 1,665.7 1,843.1 1,583.8 1,843.5 2,101.2 2,195.9 2,265.8 4.5 13.4%17 Goods 1,048.1 1,165.3 1,297.6 1,064.7 1,278.4 1,473.6 1,536.0 1,572.1 4.2 9.3%18 Services 430.4 500.4 545.5 519.1 565.1 627.6 659.9 693.7 5.1 4.1%19 Imports 2,240.9 2,375.5 2,556.4 1,976.0 2,362.0 2,669.9 2,743.1 2,766.0 2.7 16.4%20 Goods 1,896.5 2,000.3 2,146.4 1,587.3 1,951.2 2,234.6 2,295.4 2,304.5 2.7 13.6%21 Services 344.5 375.3 410.0 388.7 410.8 435.3 447.7 461.5 2.8 2.7%22 Government consumption expenditures and gross investme 2,642.2 2,801.9 3,003.2 3,089.1 3,174.0 3,158.7 3,167.0 3,137.5 0.3 18.6%23 Federal 1,002.0 1,049.8 1,155.6 1,217.7 1,303.9 1,304.1 1,295.7 1,251.2 -0.6 7.4%24 National defense 642.4 678.7 754.1 788.3 832.8 835.8 817.1 777.3 -2.2 4.6%25 Nondefense 359.6 371.0 401.5 429.4 471.1 468.2 478.6 473.9 2.2 2.8%26 State and local 1,640.2 1,752.2 1,847.6 1,871.4 1,870.2 1,854.7 1,871.3 1,886.3 0.9 11.2%