EXPENDITURE APPROACH

January 30-February 1, 2013Kingston, Jamaica

Background The expenditure approach to calculating GDP

is the sum of household and government

spending on goods and services, investment

in fixed capital (construction, machinery and

equipment), changes in inventories and

exports less imports of goods and services.

Background GDP by Expenditure Approach =

final consumption (C + G)

+ gross capital formation (I)

+ exports (X)

– imports (M)

Expenditure ComponentsY = C + G + I + (X – M)C Consumption expenditure by householdG Consumption expenditure by

governmentI Gross Fixed Capital Formation plus Change in InventoriesX Value of ExportsM Value of Imports

Household Final Consumption Expenditure (HFCE)This consists of expenditure of

resident households on the consumption of goods and services.

For households, all consumed goods, whether durable (cars, refrigerators, air-conditionersetc.) or non-durable (food, clothes), are part of final consumption.

Household Final Consumption Expenditure (HFCE)Includes:goods and services bought for final

consumption by householdsEstimated value of barter transactionsgoods produced for own final consumption by

householdsImputed value of housing services produced

by owner occupiers

Household Final Consumption Expenditure (HFCE)Services produced by employing paid

domestic staffExclusion: expenditure on fixed assets in

the form of dwellings or on valuables.

Estimated using a commodity flow method

Government Consumption Expenditure (GCE)Final consumption expenditure of

government is the value of goods and services produced by the industry for its own use.

The estimates are computed as gross output less sales of goods and services by government entities.

Government Consumption Expenditure (GCE) Output is valued as the sum of the cost of

production: - Compensation of employees - Intermediate consumption - Consumption of fixed capital - Other taxes(less subsidies) on

production

Government Consumption Expenditure (GCE)The main data sources are:

- Estimates of revenue and expenditure of central government

- government educational institutions- parish councils - public health authorities- statutory bodies.

Gross Capital Formation

Gross Fixed Capital Formation

Gross fixed capital formation is defined as

that part of the current output of goods and

services, which adds to the stock of capital,

and therefore increases the future potential

income flows of the economy.

Gross Capital Formation cont’dIt includes produced capital goods

(machinery, buildings, roads, artistic originals

etc.) and improvements to non-produced

assets.

Gross fixed capital formation is estimated

using a commodity flow approach

Gross Capital Formation cont’dChanges in InventoriesInventories consist of:raw materials - goods owned by producers

that have been purchased for intermediate consumption but not yet used

finished goods - goods produced for sale but not yet sold

work in progress – output that is not yet sufficiently processed for delivery to users

Gross Capital Formation cont’d

Changes in Inventories

Goods entering into inventories are recorded

when products are acquired or produced, and

valued at the prices prevailing at the time

Goods withdrawn from inventories are

recorded when products are sold or used, and

valued at the prices prevailing at that time

Gross Capital Formation cont’dChanges in Inventories

The Jamaican system accepts the valuation placed

on inventories by the reporting establishments.

Information is obtained from the

- Annual National Income Survey

- Financial statements

Net Exports

International Merchandise Trade Statistics

(STATIN) is the data source for imports and

exports of goods.

Trade statistics

Imports of goods are valued c.i.f

exports of goods are valued f.o.b

In the national accounts ,imports of goods are

adjusted to f.o.b

Net Exports cont’d

Data for trade in services are obtained from

the Balance of Payments statistics.

Expenditure on GDPCurrently GDP by Expenditure is estimated

annually at current prices.

GDP by Expenditure at constant prices is

compiled but not yet published

Expenditure on GDP (cont’d)Expenditure Components 2011

J$M

2011J$M

Final Consumption Expenditure 1,261,961

Household HFCE 1,063,536

Government GCE 198,425

Gross Capital Formation GCF 264,044

Gross Fixed Capital Formation

GFCF 258,015

Inventories Inv 6,029

Gross Domestic Expenditure 1,526,004

Export of Goods and Services Exports 383,866

Less Import of Goods and Services Imports 668,087

Expenditure on GDP 1,241,783

Expenditure on GDP (cont’d)

85.6%

16.0%

20.8%

0.5%

22.9%

GDP by Expenditure 2011

HFCE

Government

GFCF

Inventories

X-M

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