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US vs. UK GDP

 
 
Daytona
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      10-31-2003, 05:03 PM
Whilst reading about the US 3rd quarter GDP figure of 1.74%
(http://www.bea.gov/bea/newsrel/gdp303a.htm), I was struck by the sheer
magnitude of the outperformance compared to the UK figure of 0.6%
(http://www.national-statistics.gov.u...get.asp?id=192) and the fact that
our own BoI MPC is looking to increase interest rates to control spiraling house
prices. I wondered what growth rates the UK could achieve with a more balanced
housing market ?

Daytona
 
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Thom Baguley
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      11-03-2003, 04:59 PM
Daytona wrote:
>
> Whilst reading about the US 3rd quarter GDP figure of 1.74%
> (http://www.bea.gov/bea/newsrel/gdp303a.htm), I was struck by the sheer
> magnitude of the outperformance compared to the UK figure of 0.6%
> (http://www.national-statistics.gov.u...get.asp?id=192) and the fact that
> our own BoI MPC is looking to increase interest rates to control spiraling house
> prices. I wondered what growth rates the UK could achieve with a more balanced
> housing market ?


I don't think they are like for like.

An article in a newspaper I read recently asserted that the US GDP growth rate
was rather dodgy. They count technological advances as growth. So if a
computer in 100 mhz computer cost 1000 USD in 2003 and a 110 mhz computer cost
1000 USD in 2004 that would be 10% growth.

I have no idea if the article was correct, but that was the gist of it. I'd
welcome corroboration/debunking!

Thom
 
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The Observer
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      11-03-2003, 05:51 PM

"Thom Baguley" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> Daytona wrote:
> >
> > Whilst reading about the US 3rd quarter GDP figure of 1.74%
> > (http://www.bea.gov/bea/newsrel/gdp303a.htm), I was struck by the sheer
> > magnitude of the outperformance compared to the UK figure of 0.6%
> > (http://www.national-statistics.gov.u...get.asp?id=192) and the

fact that
> > our own BoI MPC is looking to increase interest rates to control

spiraling house
> > prices. I wondered what growth rates the UK could achieve with a more

balanced
> > housing market ?

>
> I don't think they are like for like.
>
> An article in a newspaper I read recently asserted that the US GDP growth

rate
> was rather dodgy. They count technological advances as growth. So if a
> computer in 100 mhz computer cost 1000 USD in 2003 and a 110 mhz computer

cost
> 1000 USD in 2004 that would be 10% growth.
>
> I have no idea if the article was correct, but that was the gist of it.

I'd
> welcome corroboration/debunking!
>
> Thom


I agree with you that such method of calculation is debatable.
I think the key question is how do you define 'growth' here?

I could only assume that this 'growth' refers to growth in efficiency since
it would cost less to calculate same amount of data(increase in computing
power).
IMHO, this is flawed. This efficiency gain would only be realised *IF*
economic agents adopt the use of this new technology. i.e. if companies
upgrade their computers. Hence less time spent on the same amount of work,
therefore more work can be done and real GDP growth rate is *realised*.
Otherwise I would only refer this as potential GDP growth rate.

I maybe completely....but just a thought.


 
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Stephen Burke
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      11-03-2003, 08:31 PM
Daytona <(E-Mail Removed)> wrote:
> Whilst reading about the US 3rd quarter GDP figure of 1.74%
> (http://www.bea.gov/bea/newsrel/gdp303a.htm), I was struck by the
> sheer magnitude of the outperformance compared to the UK figure of
> 0.6% (http://www.national-statistics.gov.u...get.asp?id=192)


Well, one quarter is not that significant, but indeed the US has been
outperforming us by a big margin for many years. In the last three years or so
US unemployment has risen by about 3%, and yet the economy has kept growing,
so productivity has kept rising rapidly. It's possible that US GDP could rise
for 5-6% a year for the next few years as unemployment falls again.

Also as I point out periodically, people focus on relative changes but the
absolute difference is even bigger. US GDP is something like $10 trillion, so
if it grows by 5% that's an increase of $500 billion, which is about a third
of the *total* GDP of the UK! Or at an individual level US GDP per head is
nearly $40k, so a 5% increase is an extra $2000 per person per year, which is
pretty substantial.

> and the fact that our own BoI MPC is looking to increase interest
> rates to control spiraling house prices. I wondered what growth rates
> the UK could achieve with a more balanced housing market ?


I don't think the housing market has all that much to do with it, at least in
any direct way. I think it's more to do with a lack of innovation and
relatively poor education.

--
Stephen Burke

 
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