【TEJ Dictionary】GDP Report — 2022Q1
Analyze GDP’s composition of Taiwan and USA
🔸Introduction🔸
To observe the current economic situation of a country, there are countless general economic indicators, but GDP must be indispensable. And, what is GDP? Today, this article will take you to understand the connotation and structure of GDP.
🔸Highlights of this article🔸
- Connotation and Structure of GDP
- Taiwan’s GDP — 2022Q1
- USA GDP — 2022Q1
1️⃣ Connotation and Structure of GDP
Gross Domestic Product, short as GDP, represents the market value of all final goods and services produced by domestic people of a country in a unit of time.
GDP is defined by the national border where the production is located. According to the definition of GDP, the value created by foreign workers engaged in production in the country is included in the domestic GDP, but the production value of the nationals living overseas is not included in the domestic GDP.
Note: GDP =C(consumption)+I(investment)+G(government consumption)+XM(export - import)
The proportions of GDP will vary greatly depending on the geographical environment and industrial development of each country. This article will briefly analyze the structure of Taiwan and the United States’ GDP, and then understand the main factors that affect the growth of individual economies.
2️⃣ Taiwan’s GDP
The disruption of supply chains in various countries caused by the Covid-19, impacts economic growth and resulting inflation. According to the Bureau of Accounting and Statistics of the Executive Yuan on April 28, 2022, Taiwan’s GDP economic growth rate for the whole year of 2021 is 6.45%, a record high in 11 years. This is higher than the 5.9% global economic growth rate announced by the International Monetary Fund (IMF).
Taiwan is an economy dominated by international trade. According to the data released by the Office of Export Statistics, exports accounted for 69.8% of GDP in 2021 (Figure 1). The growth of exports is mainly due to the optimistic international situation, and the major composition is semiconductor electronic components. What follows Export are imports and consumption accounted for 53.2% and 44.69% of GDP (Figure 2).
Note: The composition of international trade in GDP is exports minus imports, and the two data are pulled out and discussed separately here to let readers understand the importance of international trade to Taiwan’s economy.
The IMF estimates that world trade volume will grow by 6.0% in 2022. Taiwan will benefit from the strong business opportunities of emerging technology applications. The annual growth rate of export orders from January to March 2022 will continue to grow steadily, which also means that Taiwan’s exports will grow in the first half of 2022. According to the 2022/Q1 GDP growth rate announced by the Accounting Officer on 4/28, the growth rate of GDP is 3.06%, of which exports account for 67.47%, imports account for 52.86%, consumption accounts for 45.06%, government expenditures 13.3% and investment 26.67% %, the proportion of each item is not far from that in 2021. However, it should be noted that the variables of economic growth in 2022 are the control of the local epidemic and the issue of power supply (Figure 3).
3️⃣ USA’s GDP
The GDP growth rate of the United States in 2021 is 5.7%, the best since 1984, and the GDP growth rate in the fourth quarter of 2021 is 6.9%. The growth in the fourth quarter is mainly due to the government’s action to stimulate the economy and QE; coupled with the continuous replenishment of inventories by companies to meet consumer demand for commodities. the United States is one of the largest domestic demand countries in the world, with consumption accounting for about 70% of GDP, and the rest of the details are on average 15–25%. It is evident from Figure 4 that domestic demand plays an extremely important role in the growth of US GDP.
The US Department of Commerce announced on 2022/04/28 that GDP growth rate in the first quarter of 2022 was -1.4%, compared with 6.9% in the fourth quarter of 2020 in the previous quarter, which was the first contraction since 2020. As for the largest component of GDP — personal Consumption, grew 2.7% in the first quarter, spending on services contributed 1.86% to GDP, and spending on goods stagnated. Above phenomenon reflects changing consumer behavior. The U.S. Bureau of Economic Analysis said the main reason for the slowdown in GDP growth in the first quarter derive from the decline in inventories and the widening of the international trade deficit, while other basic demand indicators show a solid growth trend.
The Ukrainian-Russian did not stop. Therefore, prices of raw materials, base metals and agricultural products remained high, and supply chain disruptions intensified. In March, the annual growth rate of consumer price index (CPI) rose to 8.5%, continuing to hit a new high in nearly 40 years. It can be seen from Figure 5 that the trends of CPI and PCE are quite consistent, indicating that it has become a general trend to measure inflation from different angles, while price increases do not seem to have much impact on consumers’ willingness to spend.
In order to curb the rapid rise of CPI growth rate, Fed raised the federal funds rate range by 50 basis points (2 yards) to the range between 0.75% and 1% on May 5, 2022. While it is not as what market predicted, 3 yards, it is still the biggest hike in 22 years to restrain inflation that has soared to a 40-year high. More notably, the U.S. announced a “gradual” reduction of its nearly $9 trillion balance sheet starting on June 1, 2022, initially by $47.5 billion per month (including $30 billion in U.S. Treasuries and $17.5 billion in mortgage-backed securities).
Fed Chairman Powell said that policy would keep tightening at a rate of 50 basis points in the next few meetings, and not actively considering raising interest rates by 75 basis points at a time, expecting that inflation will gradually flatten .
🔸Data Source & TEJ Database Code🔸
🔸Conclusion🔸
透過GDP的結構可以知道「台灣GDP看出口，美國GDP看消費」。美國的經濟成長要留意的是通膨、貨幣政策緊縮及利率上升等因素；將視角拉回台灣本身，台灣對俄烏貿易規模不大，所以貿易上受俄烏戰爭影響有限，根據國內預測機構對台灣今年的經濟成長模式，則能夠判斷為「內外皆溫」的情形，其主因為出口表現和民間投資兩大項目。相信讀者看到這裡可以明白經濟活動對一國的重要性，因此，若您需要及時把握相關數據，歡迎你於留言版留言或來電、來信詢問
Through the structure of GDP, we can know that “Taiwan’s GDP mainly depends on exports, and the US’s GDP mainly depends on consumption.” The economic growth of the United States should pay attention to factors such as inflation, tightening monetary policy , and rising interest rates; if we look back to Taiwan itself, Taiwan’s trade with Russia and Ukraine is not large, so the influence by the Russian-Ukrainian war is limited. According to domestic forecasting agencies, Taiwan’s economic growth model this year can be judged as a situation of “both inside and outside are gentle”, which is mainly due to the export performance and private investment. Believe readers can understand the importance of economic activities to a country after reading this article. Therefore, if you need to grasp relevant data in a timely manner, you are welcome to leave a message on the message board or call or write to inquire.
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