Over at the Big Picture blog there has been talk about how bad GDP would have been if we take away the positive contribution of imports.
Fundamentally, imports fell and this “increased GDP”. As a result, some people there have been looking at GDP excluding imports.
Now, this doesn’t actually make sense as a measure to look at. Why? Well when we measure GDP we are interested in “domestic production”. When we measure consumption, investment, and government spending we get some domestically made stuff and some foreign made stuff. We take out imports to remove the foreign made stuff that appears in consumption, investment, and government spending – leaving us with only domestic production.
If we don’t include imports we are effectively “double counting” (in this case double subtracting) and so a figure without imports doesn’t tell us much about domestic production – it effectively gives us some measure of world production associated with activity in the US.
Now, if we are interested in a hypothetical where imports had been unchanged and consumption and the such remained the same then inventories would have risen – as the goods and services don’t just disappear after they turn up at the port. As a result we would have got the same GDP figure that we received the other day (a 6.1% annualised contraction).