Government Consumption and Investment
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Correlation between Government spending and Bitcoin, S&P 500, Nasdaq, gold and oil
Think of it this way
It is what the city council buys and builds, not what it hands out.
What is Government Consumption and Investment?
What all levels of government buy and build together: federal, state and local. It is not the same as the federal spending in the other charts in this section: transfers —pensions, benefits, interest— are not included here, because that money is spent by whoever receives it and would be counted twice. Only what the government buys or builds directly is included.
How to read Government Consumption and Investment
It is the most stable of the four lines: it changes because of budget decisions, not the cycle. In recessions it tends to hold up the total while private investment falls.
What Government Consumption and Investment means for the market
It explains a common confusion. Federal spending is around a fifth of GDP in the government accounts charts, and here all levels of government together come out lower: the difference is transfers, which are government spending but not government purchases. Both numbers are correct and measure different things.
Where the money flows
No money moves between accounts here: it is an accounting breakdown. GDP can be measured by what is produced, by what is earned or by what is spent, and this is the third path: who bought what the country produced. The four components are exactly that —households, businesses, government and the rest of the world— and they add up to the total with nothing left over. It matters for this section because it tells where the denominator of the series over GDP comes from: when GDP falls in a recession, it is almost always investment that collapses, not consumption, and that is worth knowing before interpreting a jump in debt to GDP.
What to watch in Government Consumption and Investment
Do not compare it directly with “Accounts to GDP”: it is not the same definition, and the figures differ for good reasons.
It does not measure liquidity: it is one of the four components that make up GDP.