Gross Domestic Product (GDP) indicates the sum value of commodities produced in a particular country for a specified period of time usually annually. Its value can be evaluating using the total value of a country’s expenses or income. That is, the total expenditure by the population or income recorded by the country’s population. Increase in the value of a country’s GDP implies a growth in the economy and likewise, its reduction shows economic recession or backward growth (Ip, 2013). Therefore, GDP is a significant indicator of a country’s economic growth. Various industries and sector available in the economy contribute wholesomely to the amount of income or expenditure by a country’s population. Increase or decrease in GDP value, therefore, indicates growth or recession of these sectors or industry in the particular period under analysis.
However, several other factors contribute to the growth of an industry more efficiently that what the overall GDP may reflect. While overall GDP reflects average growth by all industries in an economy, the indicated growth may not reflect the growth rates in individual industries. A more efficient type of GDP to evaluate the growth of an industry is the average GDP growth by industry. Such modifications of the GDP by industry are significant in measuring the rate of growth of an industry (Marshall, 2009). To evaluate the growth of the retail industry, the present analysis used data on GDP percentage change in chain-type quantity indexes for value added by the industry from 2014 first quarter to 2018 second quarter. The data was obtained from the United States Bureau of Economics (BEA) database. The following table and graph indicates the data and the analysis results.
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Table 1: Percent Changes in Chain-Type Quantity Indexes for Value Added by Industry
| Percent Changes in Chain-Type Quantity Indexes for Value Added by Industry | |||||||||||||||||||
| [Percent change] Seasonally adjusted at annual rates | |||||||||||||||||||
| Bureau of Economic Analysis | |||||||||||||||||||
| Release Date: November 01, 2018 | |||||||||||||||||||
|
2014 |
2015 |
2016 |
2017 |
2018 |
|||||||||||||||
|
I |
II |
III |
IV |
I |
II |
III |
IV |
I |
II |
III |
IV |
I |
II |
III |
IV |
I |
II |
||
| Retail trade |
1.7 |
4.4 |
2.4 |
-2.4 |
6.8 |
4.9 |
5.2 |
-0.1 |
7.5 |
1.7 |
3.4 |
4.9 |
1.4 |
6.2 |
7.9 |
1.2 |
7.6 |
-1 |
|
Figure 1: Percent Changes in Chain-Type Quantity Indexes for Value Added by Industry
From the graph above, there is a consistent increase in the percentage growth of retail industry GDP between the first quarter of 2014 and the second quarter of 2018 unless of three instances; the last quarters of 2014 and 2015 and the second quarter of 2018. Among these quarters that recorded negative growth or recession, the last quarter of 2014 had the highest margin of -2.4, followed by second quarter of 2018 with -1 while the last quarter of 2015 had the least value of -0.1. Overall, it can be concluded that GDP growth in the retail industry experienced satisfactory growth over the analyzed period.
However, there are other economic factors that significantly determine the growth or recession of individual sectors or industries of the economy. In the present analysis, the amount of money in circulation in the economy was identified as a significant indicator for the growth of the retail industry. Furthermore, government expenditure is the main determinant of the amount of money in circulation in the economy since the government is the largest consumer in any given country. Consequently, government expenditure and receipts was determined as a sufficient indicator of growth in the retail industry. Data on government expenditure was collected from BEA database from the first quarter of 2016 to the third quarter of 2018 as indicated in the table below. Analysis was conducted on the data to study changes in total government receipts and expenditures as per the graph below.
Table 2: Government Current Receipts and Expenditures
| Table 3.1. Government Current Receipts and Expenditures | |||||||||||
| [Billions of dollars] Seasonally adjusted at annual rates | |||||||||||
| Bureau of Economic Analysis | |||||||||||
| Last Revised on: November 28, 2018 - Next Release Date December 21, 2018 | |||||||||||
|
2016 |
2017 |
2018 |
|||||||||
|
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
|
| Addenda: | |||||||||||
| Total receipts |
5309.3 |
5330.8 |
5394.2 |
5428.1 |
5493 |
5471.6 |
5564.3 |
6530.8 |
5443 |
5488.7 |
5605.4 |
| Current receipts |
5284.4 |
5305.5 |
5369 |
5402.2 |
5465.9 |
5443.8 |
5524 |
5501.4 |
5413.1 |
5460.5 |
5574.1 |
| Capital transfer receipts |
24.9 |
25.2 |
25.1 |
25.9 |
27.1 |
27.8 |
40.3 |
1029.4 |
29.9 |
28.2 |
31.3 |
| Total expenditures |
6305.1 |
6309.7 |
6400.9 |
6451.6 |
6510.5 |
6500.1 |
6631.2 |
6677.1 |
6742.7 |
6834.6 |
6932.7 |
| Current expenditures |
6172.4 |
6219.5 |
6284.5 |
6328.5 |
6387.6 |
6376.2 |
6439.3 |
6549.9 |
6613.4 |
6696.6 |
6768.2 |
| Gross government investment |
636.4 |
630.2 |
627.1 |
632.2 |
637.1 |
642.3 |
640.2 |
653.2 |
659.8 |
675.6 |
686.8 |
| Capital transfer payments |
5.9 |
5.7 |
5.6 |
9.7 |
8.7 |
7.9 |
89.3 |
8.4 |
8.4 |
8.2 |
28.1 |
| Net purchases of nonproduced assets |
12.6 |
-19.6 |
11.6 |
12.9 |
12.8 |
12.9 |
6.3 |
13.2 |
13.5 |
13.6 |
14 |
| Less: Consumption of fixed capital |
522.2 |
526.1 |
527.9 |
531.8 |
535.7 |
539.2 |
543.8 |
547.5 |
552.3 |
559.3 |
564.4 |
| Net lending or net borrowing (-) |
-995.8 |
-978.9 |
-1007 |
-1023.5 |
-1018 |
-1028.5 |
-1067 |
-146.3 |
-1299.7 |
-1346 |
-1327 |
Figure 2: Government Current Receipts and Expenditures
Comparison between the changes in government receipts and expenditure and retail industry GDP growth between 2016 first quarter and 2018 second quarter indicates a positive correlation. Government receipts changed proportionally with GDP change in the successive quarter. For instance, decrease in government receipts in the first quarter of 2018 relates with decrease in retail industry GDP growth in the second quarter of 2018. Additionally, the high percentage increase in government receipts in the fourth quarter of 2017 can be related with the increase in retail industry GDP growth in the first quarter of 2018.
References
Ip, G. (2013). The little book of economics: How the economy works in the real world .
Marshall, A. (2009). Principles of economics . New York: Cosimo.
