Showing posts with label Gross Value Added. Show all posts
Showing posts with label Gross Value Added. Show all posts

Tuesday, August 15, 2017

15/8/17: A Great Recovery or a Great Stagnation?


Value-added is one measure of economic activity that links the production side to consumption/ demand side (using inputs of say $X value to produce a good that sells for $Y generates $Y-$X in Gross Value Added). Adjusted for inflation, this returns Real Gross Value Added (RGVA) in the economy. Taken across two key sectors that comprise the private sector economy: households & institutions serving the households, and private businesses (including or excluding farming sector), these provide a measure of the economic activity in the private economy (i.e. excluding Government).

Since the end of WW2, negative q/q growth rates in the private sectors RGVA have pretty accurately tracked evolution of economic growth (as measured, usually, by growth rates in GDP). Only in the mid-1950s did the private sector RGVA growth turn negative without triggering associated official recession on two occasions, and even then the negative growth rates signalled upcoming late-1950s recession.

Which brings us to the current period of Great Recovery.

Consider the chart below, computed based on the data from the Fred database:


The first thing that jumps out in the above data is that since the end of the Great Recession, the period of the Great Recovery has been associated with two episodes of sub-zero growth in the private sector RGVA. This is unprecedented for any period of recovery post-recession, except for the period between two closely-spaced 1950s recessions: July 1953-April 1954 and August 1957-March 1958.

The second thing that stands out in the data is the average growth rate in RGVA during the current recovery. At 0.579% q/q, this rate is the lowest on the record for any recovery period since the end of WW2. Worse, it is not statistically within 95% confidence interval bands for average growth rate in post-recovery periods for the entire history of the U.S. economy between January 1948 and October 2007. In other words, the Great Recovery is, statistically, not a recovery at all.

The third matter worth noting is that current non-recovery Great Recovery period is the third consecutive period of post-recession growth with declining average growth rates.

The fourth point that becomes apparent when looking at the data is that the current Great Recovery produced only two quarters with RGVA growth statistically above the average rate of growth for a 'normal' or average recovery. This is another historical record low (on per-annum-of-recovery basis) when compared across all other periods of economic recoveries.

All of the above observations combine to define one really dire aftermath of the Great Recession: despite all the talk about the Great Recovery sloshing around, the U.S. economy has never recovered from the crisis of 2007-2009. Omitting the years of the official recession from the data, the chart below shows two trends in the RGVA for the private sector economy in the U.S.


Based on quadratic trends for January 1948-June 2007 (pre-crisis trend) and for July 2009 - present (post-crisis trend), current recovery period growth is not sufficient to return the U.S. to its pre-crisis long term trend path. This is yet another historical first produced by the data. And worse, looking at the slopes of the two trend lines, the current recovery is failing to catch up with pre-crisis trend not because of the sharp decline in real economic activity during the peak recession years, but because the rate of growth post-Great Recession has been so anaemic. In other words, the current trend is drawing real value added in the U.S. economy further away from the pre-crisis trend.

The Great Recovery, folks, is really a Great (near) Stagnation.

Thursday, April 24, 2014

24/4/2014: Value Added in Irish Economy, 2010 data


CSO published analysis of value added in main sectors of the Irish economy for 2010 (yes, it takes them THAT long)... And the winners (in terms of being least important to adding value) are:

  1. Construction 
  2. Agriculture
  3. Manufacturing of food, beverages & tobacco
Per CSO summary: "The main constituents of output at basic prices in 2010 were service industries at €219.5 billion (65% of the total), production industries at €98.7 billion (29.2%), construction at €13.2 billion (3.9%) and agriculture, forestry & fishing at €6.4 billion (1.9%)."

It is really that simple: want more value-added in the economy? Pursue development of traded opportunities in Education, Health, Arts, make other domestic sectors more human capital-intensive (aka more productive and innovative), put them out into exports markets... Do what you might, just don't appoint more ministers for Agriculture or Building Construction. Instead focus on making our agriculture more innovation and productivity-focused, allow and encourage consolidation of production, push forward with reforms removing CAP subsidies from farming, in other words, pursue greater focus on growing value added component of our agricultural sector.

Here is the breakdown:


And in more details:


Footnotes to the above chart:
(1) Includes Manufacture of coke& refined petroleum products;
(2) Includes technical, administrative and support service activities
(3) Includes food and beverage service activities
(4) Includes Manufacture of furniture; 
(5) Includes repair of motor vehicles and motorcycles
(6) Includes compulsory social security
(7) Includes recreation activities and other services
(8) Includes Social work activities

Tuesday, October 29, 2013

29/10/2013: Employment & GVA: Impact of the Crisis on European Cities

Via BusinessInsider: http://www.businessinsider.com/europes-cities-in-one-chart-2013-10 Here's a chart showing the impact of the crisis on major cities:

Notice the position of Dublin as the second or third most adversely impacted city. And notice our position in terms of GVA (Gross Value Added) growth. We also represent the worst-impacted small city in the sample. Stripping out the positive effects of growth in MNCs-driven services exports and superficial transfer pricing boom delivered by the likes of Amazon, Google et al, we would be much closer to Athens in terms of overall impact.