Measuring The Economy

By | 03/02/2019

The National Income and Product Accounts (NIPAs)

How fast is the economic growth? Is it slowing down or speeding up? How does the deficit of trade impact the growth of the economy? What is happens to the spending patterns of services and goods in the market? In answering such questions concerning the economics, policymakers, as well as economists, focus on the National Income and Products Accounts(NIPAs) (United States, 2006). The Bureau of Economic Analysis (BEA) collects major economic components’ data and produces the NIPAs that is found on their website (www.bea.gov). Therefore, NIPAs is described as an economics accounts’ set that provides the output composition and value information that is produced in the United States at a given time.  Besides, NIPAs features the gross domestic product (GDP), that measures the generated value of the services and goods. Nevertheless, NIPAs can be used in determining the number of consumers as well as suppliers; hence, the current state of an economy.

Current US Economy

Currently, the economy of the United States seems to be emerging from a considerable turmoil period. A mix of economic factors such as low rates of interest, financial sector extreme risk-taking, massive mortgage lending, government tax regulations, and high indebtedness by the consumers, caused a significant recession in the year 2008 (United States, 2006). However, despite encountering such challenges at the domestic level in line with a growing transforming global economy, the U.S economy remains to be the most significant as well as largest economy globally. According to the BEA, the United States economy reflects almost 20% of the total output in the world; therefore, still larger compared to that of China. Moreover, the IMF shows that United States has a per capita GDP of $18,569 billion such that it is ranked as the sixth highest per capita economy globally. Also, the U.S economy involves services industry that is highly advanced technologically as well as developed. According to the BEA, the economy happens to be dominated by the organizations that are services-oriented in sectors like financial services, technology, retail, and healthcare among others.

The BEA uses the income versus the expenditure approach in determining the US GDP. Therefore, the BEA establishes that the current deficit of accounts is mirrored by a surplus in the capital accounts. The net received capital inflows amounts in the US from the foreign market facilitates the countries’ possibility in financing the current account deficit (United States, 2006). Since foreigners continue investing in the US economy, the US position for the net international investment has been continuously growing. For example, BEA establishes that almost 80% of the US FDI is just generated from nine developed countries.

US Real GDP from the Second Quarter 2017

The graph above presents the current GDP analysis in the US. According to the BEA’s released “third” estimate, the real GDP increases at a 2.9% annual rate in the second quarter of the year 2017 compared to a 2.7% GDP increase in the first quarter (United States, 2006). Also, the real GDP average as well as the actual GDI, an alternative approach of the US economic activity that weights both GDI and GDP, faced a 3.0% increase in the second quarter, contrary to a 2.0% percent increase in the first quarter.

Such GDP increase in the second quarter mainly reflected positive participations from the exports, private investment inventory, PCE, spending by the federal government, and the fixed non-residential investment that had been slightly offset by the negative participations from the fixed residential investment as well as the expenditure by both local and state governments. As a result, the subtracted imports from the GDP calculation increased (United States, 2006). The current GDP dollar rose by 4.1% ($192.3 billion in the second quarter to a $19,250.0 billion level. Also, in the first quarter, the current GDP dollar increased by 3.3% ($152.2 billion).

Inflation & Deflation

Inflation can be defined as an increase in price while deflation is a decrease in price. However, both inflation and deflation are measured through two primary price indexes: The Consumer Price Index and the Producer Price Index. The Consumer Price Index (CPI) measures the changes in prices in the consumer services and goods such as food, gasoline, automobiles, and clothing (United States., Federal Depository Library Program, United States., & United States, 2000). Therefore, the CPI significantly measures the changes in price from the purchaser’s perspective. Contrarily, the Producer Price Indexes (PPI) measures the change over time average in the prices that sell the domestic goods’ and services’ producers. Therefore, PPI is used in measuring the changes in price on the seller’s perspective. However, the two inflation measuring approaches provide investors with an understanding level of the economy; therefore, assisting in the investors’ decision-making.

Current US Inflation and Deflation Position

Year over year, the core rate of inflation in the US was 1.7%, below the 2.0% target by the Fed. Prices have increased by 0.4%. For example, the costs for gas have risen by 6.3% over the last five years. As a result, the forecast for the oil price has boosted the prices on an increased demand basis. Contrary, supply happens not to be growing, albeit the competition between the United States producers of shale oil as well as the OPEC (United States., Federal Depository Library Program, United States., & United States, 2000).  Also, the trucks’ used cars’ prices have declined by 0.2% and have not impacted the transport services, that has increased by 0.45%. The medical care costs have also increased by 0.2% since the commodities of medical care have risen by 0.1%.

Employment

Every month, the Bureau of Labor Statistics provides data concerning the current employment situation in the news release (“Employment Situation”). The data is collected from two separate surveys. The first study is the Current Population Survey (CPS) while the other is known as the Employment Statistics Survey (CES). However, such data is essential since it serves as a significant labor market strength indicators and it provides a country’s economy early snapshots.

Current US Employment Rate

According to the Bureau of Labor Statistics, the US unemployment rate has declined by 0.2% to 4.2% in September 2017. As a result, the unemployed individuals has decreased by 331,100 to 6.8 million. Also, based on the principal working groups, the rates of unemployment for the adult men (3.9%) as well as the Blacks (7.0%) has decreased in September 2017 (Russek, Blom, & United States, 2005).  Also, the adult women unemployment rates (3.9%), Whites (3.7%), teenagers (12.9%), Hispanics (5.1%), and Asians (3.7%) reflected little change. However, the amount of the individuals who were long-term unemployed (unemployed for more than 27 weeks) was significantly unchanged at 1.7million; hence, accounting for a 25.5% of those jobless. The Bureau of Labor Statistics also shows that ration of the employment-population raised by 0.3% to 60.4% in September 2017; therefore, rising by 0.6% over the last 12 months. At 63.1%, the participation rate by the labor force little changed during September; thus, reflecting little movement in the year 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *