GO Beyond GDP: Case for gross output as the top line in national income accounting

In April 2014, the Bureau of Economic Analysis began publishing a new measure of the aggregate economy called gross output (GO), the first macro measure to be released on a quarterly basis since gross domestic product (GDP) was invented in the 1940s. GO is a broader measure of economic activity, adding up sales/revenues at all stages of production, and serves as a complement to GDP. It attempts to measure the production process or the “make” economy while GDP is a measure of final goods and services, or the “use” economy. Gross output by industry offers insights into the direction and structure of the U. S. economy. It demonstrates that business spending in the supply chain is significantly larger than consumer spending in the economy and tends to be more volatile than GDP. Earlier-stage and intermediate inputs in GO may also be helpful in forecasting the direction of economic growth. In this paper, I argue that gross output should be the starting point of national income accounting as the "top line" (while GDP is the "bottom line"). GO can be integrated into macroeconomic analysis and textbook economics and is more consistent with leading indicators and growth theory. GO and GDP complement each other as macroeconomic tools. Both should play a vital role in national accounting statistics, much like top-line and bottom-line accounting are employed to provide a complete picture of quarterly earnings reports of publicly-traded companies. Ultimately GO is a powerful unifying force between the accounting, finance and economics disciplines; it links micro with macroeconomics; and it appeals to all the major schools of economics.