Tuesday, 17 December 2019

Industrial contribution to GDP growth

I recently came across this article here from "better dwelling" which is claiming that half of the 2019 Q3 GDP growth can be attributed to Real-Estate commissions.

To say the least I was surprised and very skeptical of this claim.

To evaluate I dug deeper into the article and then the data they used.

First of all the NAICS code [53] Real Estate Rental and Leasing (RERL) accounts for more than what is claimed by "better dwelling":
RERL is the contribution to GDP made during managing, selling, renting and/or buying real estate. To simplify it, it’s the commissions made from managing real estate transactions.
Although not nearly as significant it also includes other rental and leasing such as automotive, and consumer and commercial equipment, albeit this is a small component of RERL accounts. To simplify it is NOT just the commissions made from managing real estate transactions

Second. I am not entirely confident in how they determine that RERL accounts for just over 50% of the increase in annual GDP.

My Methodology in calculating:

  1. Obtain GDP by industry from StatsCan. Canada this is 2018Q3 and 2019Q3, for all other provinces listed this 2017 and 2018 annual GDP. 
  2. Calculate the growth rate of each industry.
  3. Determine the weight of each industry in relation to total GDP.
  4. Determine the weighted growth rate of each industry. 
  5. Divide the weighted growth by the total growth to find the percent contribution to total growth.
The results of this methodology for Canada and each province is presented below. Note, for 2019Q3 I calculate Real Estate Renting and Leasing to only account for about 27% of the GDP growth. Mind you this is up substantially from 2018 where it accounted for only about 11% of the GDP growth.

The graphs below are presented without any further discussion. 

Feel free to comment with your thoughts or questions below.
















1 comment:

  1. Reading this article and your post has made me very aware that I need to learn more on the subject of economics. The language and subject is very foreign to me, as my interests are very much in the natural world ( I work with plants!). I can see how this is very important in the world we live in and I really would like to know more so I am excited to take this course. I wish I had more of an opinion to give regarding the 'Industrial Contribution to GDP Growth' but this has been an interesting read and a good chance for me to google acronyms and new words :)

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