BPEA | Fall 2011

The Income- and Expenditure-Side Estimates of U.S. Output Growth–An Update to 2011Q2

Jeremy J. Nalewaik
Jeremy J. Nalewaik Board of Governors of the Federal Reserve System

Fall 2011

In light of recent large revisions to the official measures of
U.S. output, this update reviews the evidence in my 2010 Brookings Paper
showing that the income-side estimate of output (currently called gross domestic
income, or GDI) likely captures business cycle fluctuations in true output
better than its better-known expenditure-side counterpart (called gross domestic
product, or GDP). Most notably, over the 2007–09 downturn, the revisions
moved the expenditure-side estimates closer to the income-side estimates,
which showed that the downturn was considerably worse than reported initially
by the expenditure-side estimates. The tendency for the expenditure-side
estimates to be revised toward the income-side estimates is clearer now, as is a
tendency for the smoothed income-side estimates to be revised away from the
smoothed expenditure-side estimates.