The Phaserl


US Economy – Gross Output Continues to Slump

by Pater Tenebrarum, Acting Man:

The Cracks in the Economy’s Foundation Become Bigger

Last week the Bureau of Economic Analysis has updated its gross output data for US industries until the end of Q4 2015. Unfortunately these data are only available with a considerable lag, but they used to be published only once every few years in the past, so the current situation represents a significant improvement.

As Ned Piplovic summarizes in his update on the situation on Dr. Mark Skousen’s site:

“US economic activity continued to slow dramatically in the 4th quarter 2015, threatening recession.  As a whole, the growth rate of the economy was anemic, almost flat, for 2015.

Gross output (GO), the new measure of total U. S. economic activity published by the Bureau of Economic Analysis, showed that spending throughout the economy declined slightly in the 4th quarter of 2015.  And the Skousen B2B Index — a measure of business spending throughout the supply chain — has now fallen two quarters in a row.  Both data suggest a mild business recession as we entered 2016.

Based on data released today by the BEA and adjusted to include all sales throughout the production process, nominal GO fell 0.6% in the 4th quarter of 2015, compared to an increase in the 3rd quarter (+2.3%).   Adjusted GO was $39.0 trillion in the 4th quarter, more than double the size of GDP ($18.2 trillion), which measures final output only.  Nominal GDP actually rose 2.3% in the 4th quarter.  When GO declines relatively to GDP, it’s usually a sign of recession.”


(emphasis added)

This is in keeping with the Fed district manufacturing surveys in Q4, and while it looked for a while as if things might be getting a little better in Q1 2016, there has been renewed deterioration in the meantime (see e.g. Mish’s recent updates on the Philly Fed,  durable goods orders and services). Here is a chart of Dr. Skousen’s nominal adjusted gross output vs. GDP (quarterly annualized growth rates):


1-adj. GO vs. GDPAdjusted nominal GO (red line) vs. GDP (black line), quarterly change rate annualized – click to enlarge.


The next  chart shows gross output data of selected industries compared to the industrial production index and non-defense capital goods orders (y/y change rates):

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