...And A New Emphasis On Gross Domestic ProductGene Koretz
Besides shifting to a new base, Commerce will soon start stressing gross domestic product (GDP) rather than gnp as a measure of economic activity. The big difference is that GNP includes net factor income-primarily foreign earnings of U.S. companies minus similar earnings of foreign companies in the U.S., plus net interest flows. By contrast, GDP focuses solely on economic activity and income earned in the U.S.
Commerce says it is stressing GDP because this measure is commonly used for international comparisons and reflects production taking place in the U.S. But neither Germany nor Japan stress GDP, and some observers suspect a political motive. "Because net U.S. factor income growth has been falling in the wake of the tidal wave of foreign investment in the U.S.," says economic consultant Eugene Birnbaum, "shifting to GDP is likely to make the economy seem a bit healthier than GNP."