GDP Is Not Measuring Much

Steven Hansen profile picture
Steven Hansen
3.14K Followers

Summary

  • What exactly is GDP measuring.
  • It surely is not measuring the state of the population as personal income growth continues to become a smaller share of overall USA spending,.
  • And when one looks at median income, the growing lack of correlation is more ominous.

I hate using GDP as a metric for economic growth. It does not measure how Jane and Joe Sixpack are doing.

Even disposable personal income is a metric which includes a lot elements that the relatively poor Sixpacks do not see reflected in income gains. This is aggravated because disposable income is an average (and not median).

Median income is not tracked in real time having almost a one year lag. Median income data is current only through the end of 2016. When one indexes median income and GDP - one sees GDP growing much faster than median income.

In fact, from 2000 to 2015, median income has grown 20% whilst GDP increased 80% [numbers are not inflation adjusted but are seasonally adjusted]. GDP measures money spent on new items or services whether that sale was profitable or not.

I am not sure one can tell what GDP is saying about the state of the economy.

My usual weekly wrap is in my instablog.

This article was written by

Steven Hansen profile picture
3.14K Followers
Steven Hansen (A.K.A "The Hand") was born, raised and educated in California. Steven worked for 25 years for a major international engineering and construction corporation. He has lived outside of the USA almost continuously since 1978. Steven retired in 1995 to sail the world. He is still sailing today and is currently located in Malaysia. On the financial side, Steven is a pragmatist. His motto is to "go with the flow" and believes that the only correct investing method is one which makes you money both short and long term. He does not fall in love with philosophies – only results. He has invested well enough to retire at 45 and stay retired.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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