What GDP’s cousin can tell us about the economy

GROSS domestic product (GDP) is a great measure of the economy, but it would be a gross exaggeration to say it’s the only one. The Bureau of Economic Analysis also puts out gross domestic income, value added by industry and gross output by industry, to name three alternatives. The variety of indicators “puts powers in the hands of users to select the statistics that work best for their needs”, a bureau spokesman, Thomas Dail, wrote to me last week.

I want to zero in on gross output by industry because it’s a strange beast. First of all, it’s much bigger than gross domestic product. Last year, when the US GDP was around US$25.5 trillion, gross output was around US$46 trillion (neither figure adjusted for inflation).

Gross output is bigger than gross domestic product because of deliberate double counting. Gross domestic product is the market value of goods and services produced in the United States. Gross output is the sum of GDP and all the intermediate inputs into GDP, such as energy, raw materials, semifinished goods and purchased services. It sums up the sales that companies make, without subtracting their costs of goods sold.