Gross output is used to measure the total economic activity of a business or industry. Where GDP only accounts for the final goods and services provided, GO includes both the final output as well as costs of production. This makes it a more comprehensive measure of economic activity and gives us a broader and more complete picture of the health of the current economy.
Example: A manufacturer buys leather, rubber for soles, laces, foam insoles, as well as other small items to produce shoes. They also use energy to run their facility and the equipment used to produce their product. The manufacturer pays one employee to help assemble the shoes and another to transport the finished product to customers or retailers. All of these costs are factored into the gross output. In our example, the manufacturer’s gross output is the revenue earned from the selling of their products.
As of March 2024, the U.S. Gross Output has not looked healthy and has trailed the GDP growth rate for the last few quarters. Business spending has shown no real growth since the beginning of 2022. Consumer spending outpaced business spending growth. Unlike consumption, business spending is more volatile and sensitive to economic fluctuations.
The latest GO report showed a rise of 2.4%, which is quite a bit lower than the 3.5% growth from the previous period and trails the 3.4% growth of GDP. In general, when the GO trails the GDP, it usually foreshadows trouble.
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