True Consumption as Percentage of GDP

To follow up on Consumer Goods vs. Factors of Production:

In that post I illustrated consumer goods production vs. investment goods production in the US. I noticed that the composition of the GDP at bea.gov has one flaw: It includes so called “Residential Investment” under Investment. But what mostly falls under this category are purchases of new homes.

A home clearly does not qualify as a factor of production and it is thus a mistake to include the production of it under investment goods (factors of production). It makes a lot more sense to include it under consumption.

The percentage of consumption vs. GDP throughout history would then look like this:

us-true-consumption-as-percentage-of-gdp-1929-2008

The likely bottom for a serious recovery would here be somewhere between 86% and 90%.

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