Frequently Asked Questions
Guidelines for Citing BEA Information | ID: 1034 | Created: Apr-22-2014
Gross output by industry and gross domestic product (GDP) by industry are both highly useful economic statistics that are published as part of BEA's industry accounts. Gross output is principally a measure of an industry's sales or receipts, which can include sales to final users in the economy (GDP) or sales to other industries (intermediate inputs). Gross output can also be measured as the sum of an industry's value added and intermediate inputs. Value added (i.e. GDP) consists of compensation of employees, taxes on production and imports, less subsidies, and gross operating surplus. Intermediate inputs refer to the value of both foreign and domestically produced goods and services which are used as energy, materials, and purchased services as part of an industry's production process. Value added does not include intermediate inputs. Gross output does. In the industry accounts, gross output is presented annually for 402 industries and 69 commodities.
The industry accounts strive to present statistics that illustrate the industry dynamics that play out within the overall economy. Measures of the gross output of each industry, the purchases of intermediate inputs from other industries, and value added measures tell us about the contribution of an industry or sector to GDP. At the industry level, gross output is a worthwhile measure to track — especially in relation to value added. For some industries like manufacturing the total amount that is produced and sold as intermediate inputs to other industries are important components of the final products sold in the economy.
Because gross output reflects double-counting — both the sales of intermediate and final products — it is often referred to as "gross duplicated output." In contrast, industry value added is defined as the value of the industry's sales to other industries and to final users minus the value of its purchases from other industries. Value added is a non-duplicative measure of production that when aggregated across all industries equals GDP. It provides a complimentary indicator to that of final sales. While gross output is a useful measure of an individual industry's output, gross output for the economy as a whole double-counts sales between industries and is a less than reliable measure of aggregate business cycles or growth.
Gross output by industry is an essential statistical tool needed to study and understand the interrelationships of the industries that underlie the overall economy. However, because of its duplicative nature, it may not be a good stand-alone indicator of the overall health of an industry or sector. What can one infer about the economic health of an industry solely from the fact that gross output increases? Nothing, without understanding what happened to the change in intermediate inputs and to value added. Did the increase in gross output simply reflect a change in the extent of outsourcing or could it reflect a more substantive, fundamental change in the economy? Gross output alone does not provide enough information to answer that question. Moreover, focusing solely on gross output is likely to exaggerate the cyclical-nature of the economy, particularly for sectors that are more sensitive to this cyclicality, like manufacturing. For example, value added for durable-goods manufacturing dropped 15 percent in 2009, while gross output dropped 19 percent. The decline in gross output is much more pronounced than the decline in value added because it includes each of the successive declines in the intermediate inputs supply chain required to manufacture the durable goods.
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