Box: Gross Product Originating: Definition and Relationship to Gross Domestic Product

Gross product, or gross product originating (GPO), by industry is the contribution of each industry—including government—to gross domestic product (GDP). An industry's GPO, often referred to as its "value added," is equal to its gross output (sales or receipts and other operating income, plus inventory change) minus its intermediate inputs (consumption of goods and services purchased from other industries or imported).

In concept, GDP measured as the sum of GPO in all industries is the same as GDP measured in two other ways: (1) As the sum of expenditures (consumer spending, investment, net exports, and government purchases) and (2) as the sum of costs incurred (compensation of employees, net interest, indirect business taxes, etc.) and profits earned in production. In practice, BEA implements only the latter two ways, using less than perfectly consistent source data, so the resulting totals are not the same.

The current-dollar estimate of GDP is defined as the sum of the expenditure components; gross domestic income is defined as the sum of costs incurred and profits earned./1/ The difference between GDP and gross domestic income is the statistical discrepancy. The current-dollar GPO estimates are measured as the sum of distributions by industry of the components of gross domestic income. Thus, the sum of the current-dollar GPO estimates also differs from current-dollar GDP by the statistical discrepancy.

The constant-dollar estimate of GDP is also measured as the sum of the expenditure components. Constant-dollar estimates of gross domestic income are not prepared, however, because price indexes for deflation cannot be associated with income measures as they can be with the goods and services that make up the expenditure measures. Constant-dollar GPO estimates for most industries are measured using estimates of gross output and intermediate inputs.

The sum of the constant-dollar GPO estimates differs from constant-dollar GDP by the constant-dollar statistical discrepancy plus an additional discrepancy, termed the "residual." The residual appears in the constant-dollar GPO estimates because of BEA's judgment that the constant-dollar expenditure components used to measure GDP are more accurate than the constant-dollar GPO estimates. The amount of detailed expenditures data that are available for weighting price indexes is greater than that for gross outputs and intermediate inputs, and little information is collected annually on the composition of inputs or of nonmanufacturing outputs. For some industries, no source data are available to measure gross output, and the resulting GPO estimates are prepared using less reliable methodologies.

1. Gross domestic income, which is GDP less the statistical discrepancy, is not shown in the NIPA tables, but gross national income, which is GNP less the statistical discrepancy, is shown in NIPA table 1.9. Gross domestic income is omitted because national measures of income, which refer to the income available to U.S. residents as a result of their contribution to production, are generally more appropriate for analysis relating to sources and uses of income. Gross domestic income differs from gross national income, as GDP differs from GNP, by the exclusion of net receipts of factor income from the rest of the world.