Visualizing GDP: The Consumer Is Key

Note from dshort: The charts in this commentary have been updated to include the Q4 GDP Advance Estimate.

The chart below is my way to visualize real GDP change since 2007. I've used a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself.

My data source for this chart is the Excel file accompanying the BEA's latest GDP news release (see the links in the right column). Specifically, I used Table 2: Contributions to Percent Change in Real Gross Domestic Product.

Over the time frame of this chart, the Personal Consumption Expenditures (PCE) component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. The contribution of PCE came at 1.45 of the 2.76 real GDP. This is an improvement over the 1.24 PCE contribution to the 1.82 Q3 GDP.

Note: GDP is normally rounded to one decimal place, currently at 2.8. The 2.76 GDP in the chart above is the sum of the four components expressed to two decimal places in Table 2. Real GDP calculated to two decimal places based on the BEA chained 2005 dollar amounts in Table 3 of the Excel file is 2.75.

For a long-term view of the role of personal consumption in GDP and how it has increased over time, here is a snapshot of the PCE-to-GDP ratio since the inception of quarterly GDP in 1947.