Skousen CAFE: The Economy Is Back on Track: Good News for Trump
By Mark Skousen
Editor, Forecasts & Strategies
The economy is now moving from “slow growth” to robust growth. Today, the federal government released data on the economy that supported this optimistic outlook, and it explains why the stock market has done well since Donald Trump was elected as the next U.S. president.
The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s. With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld and William Nordhaus conclude in their book, “A New Architecture for the U. S. National Accounts,” “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”
In my view, Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending. By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds, which is often reported by the media. As the chart above demonstrates, business spending is, in fact, almost twice the size of consumer spending in the U.S. economy.
Three Investment Conferences
I’ll be discussing gold, Trump stocks and other investment strategies in three upcoming conferences in the next couple of months:
In case you missed it, I encourage you to read my e-letter article from last week on two opposing economic ideas.
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