New economic measure reveals consumer spending is only 30% of activity.
The article introduces a new way to measure economic performance called Gross Domestic Expenditures (GDE). Unlike the traditional measure, Gross Domestic Product (GDP), GDE includes all stages of production, not just final output. By analyzing sales at different production levels, GDE provides a more balanced view of economic activity. In the United States, GDE is found to be more than twice the size of GDP and is a better indicator of business cycle activity. Contrary to popular belief, consumer spending actually represents around 30 percent of total economic activity, not 70 percent as commonly thought.