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GDI and GDP

GDI and GDP

GDP is down and GDI leveling off, the question is why are they diverging.

A big mystery for economic wonks everywhere has been the unprecedented divergence between two growth yardsticks that, historically, have been more aligned.

Revised figures today bring the measures more in step, and partly solve the mystery. But the result isn’t especially reassuring: Depending on your preferred metric, economic growth was weaker than previously thought.

The notable revisions were for gross domestic income (GDI). As the name suggests, the measure sums up all of the income in the economy — business profits, interest payments and wages. It initially painted a rosier growth picture.

Why it matters: Lackluster gross domestic product (GDP) didn’t seem to square with the gangbusters labor market. That’s why some economists were certain GDP would eventually be upwardly revised to better match GDI figures. That outcome hasn’t materialized — for now, at least.

What’s going on: One driver behind the downward GDI revision was slower labor compensation than initially reported. In other words, worker wage growth wasn’t as hot as we thought.

Axios Macro By Neil Irwin and Courtenay Brown · Sep 29, 2022

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