Courtesy of Mish.
Disputes over GDP go on and on and on. MarketWatch reports By another measure, the U.S. economy was ho-hum in second quarter.
There are two ways to compute how well the economy is doing.
One is to tally all the goods and services produced during a given time period — that’s called gross domestic product.
Another is to measure all the incomes earned in the production of those goods and services — that’s called gross domestic income.
Over time, they should be exactly the same. But measurement isn’t easy, and so the Commerce Department not only reports both figures, but also for the first time on Thursday averaged the two together.
The result wasn’t great: It’s showed a 2.1% average for the second quarter, since GDP growth was a sterling 3.7% and GDI was a meager 0.6%.
According to Josh Shapiro, chief U.S. economist at MFR, that’s the largest gap between the two measures of the economy since the third quarter of 2007.
“Some research has shown the GDI figures to be a more accurate representation of economic activity, but the evidence is mixed and the debate continues. Nonetheless, the disparity reported in Q2 does lend credence to the notion that the GDP growth reported in the quarter likely overstates the underlying vitality of the economy in the span,” he said in a note to clients.
Two Measures
That may look significant, but let’s investigate further.
DGI vs. GDP Percent Change from Year Ago
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