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Posts tagged with: "GDPA"

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The federal budget balance as a fraction of GDP

Tracking data from two sources with two different calendars

The FRED Blog has discussed how many weekdays there are per month, quarter, and year. (It may seem trivial, but when you work with data, you need to be precise about federal and local holidays and how weekends shake out in a given month.)

Today, we consider two data sources, each with its own calendar year.

The FRED graph above shows the balance of the federal government budget as a percent of GDP. To calculate the budget balance, we subtract the value of federal net outlays from the value of federal receipts. Because those receipts and outlays change with the overall level of economic activity, we divide their difference by GDP and multiply by 100 to show it at as annual percentage.

And here’s the rub: Federal receipts and net outlays are reported by the Office of Management and Budget (OMB) for the fiscal year, which runs from October of the previous year to September of the current year. But GDP is reported by the Bureau of Economic Analysis (BEA) for the calendar year, which—just to make sure we’re on the same page—runs from January to December. So each organization counts 12 months for each year but starts counting on different dates.

If you want to learn more, keep on reading…

The second FRED graph shows the annual balance of the federal government budget as a percent of GDP using both calendars: Data from the fiscal year is in red, and data from the calendar year is in blue. The lines are very similar in value, meaning that the use of two different calendars has a small impact on the calculation overall. Small though it may be, the difference is largest for the calendar year at the end of a recession. At that time, the automatic stabilizers of fiscal policy have widened the gap between federal revenues and outlays while GDP is starting to rebound.

How these graphs were created: For the first graph, search for and select “Federal Receipts.” From the “Edit Graph” panel, use the “Edit Line 1” tab to customize the data by searching for and selecting “Federal Net Outlays” and “Gross Domestic Product (GDPA).” Next, create a custom formula to combine the series by typing in (((a-b)/1000)/c)*100 and clicking “Apply.”
For the second graph, from FRED’s main page, browse data by “Release.” Search for ”Debt to Gross Domestic Product Ratios” and check the two boxes under “Federal Surplus or Deficit [-] as Percent of Gross Domestic Product.” Last, click “Add to Graph.”

Suggested by Diego Mendez-Carbajo, Maria Arias, and Chris Russell.

View on FRED, series used in this post: FYFR, FYFSDFYGDP, FYFSGDA188S, FYONET, GDPA

The usual suspects (behind U.S. trade deficits): China, Canada, Mexico, Japan, and Germany

A long-term lineup of U.S. trading partners

According to economic theory, countries should export goods in which they have a comparative advantage in production and import those in which they don’t. For several years, the U.S. has been the number 1 importer and the number 2 exporter in the world. But the U.S. has recently imposed tariffs on imports from several foreign nations, citing the growing U.S. trade deficit as a main reason. So let’s use FRED to examine the overall picture of the U.S. trade deficit and the trade balance with its largest trading partners.

The first graph shows net U.S. exports, defined as the difference between total exports and total imports, divided by GDP. This net exports-to-GDP ratio has been negative since the late 1970s, when the U.S. started running a continual trade deficit. One explanation involves important sources of income the U.S. receives from abroad, as explained in a past FRED Blog post. This flow of foreign income allows the U.S. economy to consume more than it produces.

Exploring this and other theories in detail is beyond the scope of this post, but this persistent trade deficit over the past 40 or so years does lead to interesting questions involving the U.S.’s trading partners. For instance, is the trade deficit driven mostly by trade with one particular country?

The second graph plots the difference between exports and imports as a share of GDP with respect to the U.S.’s five largest trading partners: China, Canada, Mexico, Japan, and Germany. We can see right away that there’s a significant difference between the U.S. trade deficit with China and the U.S. trade deficits with the other countries. It’s also interesting to note that, in the 1990s, the largest share of the trade deficit originated from trade with Japan. But since China’s entry to the WTO in late 2001, the largest share is China’s. We also see that the U.S. had roughly balanced trade with Mexico in the early 1990s; but around 1994, coinciding with the implementation of NAFTA, the trade pattern changed and a noticeable deficit with Mexico emerged.

Now, is having persistently large trade deficits a bad thing? The answer to this question is not straightforward. There are several forces affecting the direction of trade with different countries, and a substantial amount of research in economics is dedicated to answering this question.

How these graphs were created: For the first graph, search for and select “Net Exports of Goods and Services, Billions of Dollars.” From the “Edit Graph” panel, add a second series to the graph: “Gross Domestic Product, Billions of Dollars.” In the formula box, type a*100/b. For the second graph, search for and select “U.S. Exports of Goods by F.A.S. Basis to China, Mainland (EXPCH).” From the “Edit Graph” panel, add a second series to the graph: “U.S. Imports of Goods by Customs Basis from Germany.” Then add the “Gross Domestic Product, Billions of Dollars” series again. In the formula box, type (a-b)*100/(c*1000). Then use the “Add Line” feature to repeat the above steps for the other countries (Canada, Mexico, Japan, and Germany).

Suggested by Asha Bharadwaj and Maximiliano Dvorkin.


Good times for dividends

Measuring the value of net corporate dividends in the U.S. economy

Today, FRED will help us track the value of something called aggregate net corporate dividends. First, a few definitions:

1. Dividends are distributions of a portion of a company’s earnings to its shareholders.

2. Corporate dividends are dividends paid by corporations.

3. The federal government adjusts the aggregate corporate dividends data to account for dividends paid and received from abroad. (This makes the data consistent with other aspects of the national income accounts.) These adjusted values are net corporate dividends.

Net corporate dividends have grown from $5.8 billion in 1929 to $990 billion in 2017. Of course, this growth is largely driven by the general increase in prices—i.e., inflation—and by the increase in overall real economic activity. FRED can help us get a sense of the value of these dividends relative to the total economy by plotting net corporate dividends as a fraction of nominal gross domestic product. The graph includes each year from 1929 through 2017. Apart from a few years during and after the most recent recession, this value has exceeded 5 percent for the past 11 years. Before this, you’d have to go back to World War II for this value to exceed 5 percent. So, yes: Good times for dividends.

How this graph was created: Search for “corporate dividend,” choose the series “Net Corporate Dividend Payments,” and click “Edit Graph.” In the “Edit Line 1” panel, enter “nominal gross domestic product” in the search field, choose “Gross Domestic Product, Billions of Dollars, Not Seasonally Adjusted,” and click “Add.” Next, to compute the ratio of these two variables, type “a/b” in the formula field (where “a” is the dividends variable and “b” is the nominal GDP variable) and click “Apply.”

Suggested by Bill Dupor.

View on FRED, series used in this post: B056RC1A027NBEA, GDPA

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