Widdekind
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- Mar 26, 2012
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GDP measures total revenue, for new final goods & services. GDP measures total "gross value added" to raw materials (zero value), to produce those goods & services (GDP value). However, new final goods & services, sold at retail stores, were gradually assembled, through many steps, along a "supply chain", with some "net value added" at each step. Intermediate producers buy partial products, add a "bell and a whistle", and pass them on. Their revenues are expenses to the next intermediate producer in the chain, and so on.
Gross Output (GO) accounts all of those intermediate sales. GO is the total sales volume, over all transactions, even sales of raw materials to intermediate producers, and intermediate products to final retailers. For the US, GO is nearly twice GDP. The ratio of GO/GDP measures both the "length & breadth" of the supply chain.
During expansions, both GDP & GO increase. But, GO surges more than GDP. The ratio of GO/GDP oscillates pro-cyciclically with the business cycle. The ratio crashes during recessions. Inexpertly, that implies that during upswings, more "bells & whistles" are added to more products; new "luxury" features are added, from new suppliers. The supply chain may lengthen, but it also broadens. Either way, sales volume not only increases over last year on pre-existing (intermediate) products, but new (intermediate) products are sought & supplied. Then, during downturns, those "luxury" features are foregone, as the supply chain contracts to more "necessary" components.
The large & growing multiplier, between GO/GDP, implies that a surging GDP opens up even more opportunities for business -- first, sales intensify over last year on the old supply chain; and they also "extensify", as the supply chain expands, to accept new inputs not seen before. Roughly, when retailers do +$1 of extra business "at the cash register"; then wholesalers are doing +$2 of extra business "back in the warehouse".
references
BEA : Gross-Domestic-Product-(GDP)-by-Industry Data
Gross output - Wikipedia, the free encyclopedia
Gross Output I | Wealth Alchemy
Gross Output (GO) accounts all of those intermediate sales. GO is the total sales volume, over all transactions, even sales of raw materials to intermediate producers, and intermediate products to final retailers. For the US, GO is nearly twice GDP. The ratio of GO/GDP measures both the "length & breadth" of the supply chain.
During expansions, both GDP & GO increase. But, GO surges more than GDP. The ratio of GO/GDP oscillates pro-cyciclically with the business cycle. The ratio crashes during recessions. Inexpertly, that implies that during upswings, more "bells & whistles" are added to more products; new "luxury" features are added, from new suppliers. The supply chain may lengthen, but it also broadens. Either way, sales volume not only increases over last year on pre-existing (intermediate) products, but new (intermediate) products are sought & supplied. Then, during downturns, those "luxury" features are foregone, as the supply chain contracts to more "necessary" components.
The large & growing multiplier, between GO/GDP, implies that a surging GDP opens up even more opportunities for business -- first, sales intensify over last year on the old supply chain; and they also "extensify", as the supply chain expands, to accept new inputs not seen before. Roughly, when retailers do +$1 of extra business "at the cash register"; then wholesalers are doing +$2 of extra business "back in the warehouse".
references
BEA : Gross-Domestic-Product-(GDP)-by-Industry Data
Gross output - Wikipedia, the free encyclopedia
Gross Output I | Wealth Alchemy