BPEA | Spring 2010

The Income – and Expenditure – Side Estimates of U.S. Output Growth

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

Spring 2010

The two official measures of U.S. economic output, gross
domestic product (GDP) and gross domestic income (GDI), have shown
markedly different business cycle fluctuations over the past 25 years, with GDI
showing a more pronounced cycle than GDP. This paper reports a broad range
of results that indicate that GDI better reflects the business cycle fluctuations
in true output growth. Results on revisions to the estimates, and correlations
with numerous other cyclically sensitive variables, are particularly favorable
to GDI. The most recent GDI data show the 2007–09 downturn to have been
considerably worse than is reflected in GDP.