Over the next five years, India is anticipated to have the fastest economic growth of the 132 countries analyzed by FocusEconomics. While the country was heavily struck by the Covid-19 outbreak and the following draconian lockdown last spring, infection rates have dropped dramatically in recent months, the domestic vaccine campaign is now underway, and recent economic indicatorssuch as PMI readings and trade dataare positive. In the coming years, rising consumption, investment, and exports will drive development, with a favorable base effect in 2021 following the collapse of 2020 also playing a role. Furthermore, recent structural reforms, such as the goal of privatizing state-owned banks, allowing greater foreign participation in the insurance sector, and market-oriented agricultural reforms, all pose upside risks. However, there are concerns about the political will to carry out the reforms, and weak infrastructure will continue to stymie growth. Furthermore, the decision by ASEAN countries, Australia, China, Japan, New Zealand, and South Korea in late 2019 to withdraw from the Regional Comprehensive Economic Partnership (RCEP)a free-trade pact recently agreed upon by ASEAN countries, Australia, China, Japan, New Zealand, and South Koreacould stymie the external sector.
“With Covid-19 under control, the economy has already begun to normalize at a faster rate than anticipated. Front-loaded and higher government spending, the lag effects of easier financial conditions, faster global trade, and ongoing vaccinations should all combine to cause cyclical growth to accelerate sharply. We maintain our above-consensus real GDP growth forecast of 13.5 percent year over year in FY22, compared to -6.7 percent in FY21, with the budget adding upside risk to our FY23 projection (6.1 percent).” – Mr. Nomura
Bangladesh
Bangladesh has fared quite well during the Covid-19 crisis: While decreased garment exports slowed growth last year, strong remittance inflows and improving industrial production have helped the recovery in recent months. In the future, the economy should be driven by rapid export growth and increasing domestic demand. Furthermore, the country’s demographics will continue to be favorable: The dependence ratiothe ratio of the working-age population to the population not in the labor forcehas plummeted in recent decades as a result of past success in lowering fertility rates, helping productivity and enhancing public finances. Slow vaccination progress, on the other hand, constitutes a risk.
“The expected repatriation of Bangladeshi migrants to their foreign workplaces will keep remittances from plunging, keeping private consumption high.” Increased investment spending as a result of a slew of ongoing infrastructure development projects, as well as a pick-up in domestic activity, will bolster growth. Positive base effects in the second half of the fiscal year, compared to the period of coronavirus-induced lockdown in the same period in 2020, will bolster the ongoing domestic recovery. A potential increase in coronavirus cases in Bangladesh, which could compel the government to reintroduce harsh containment measures, is a downside risk to our forecast. Before 2022/23, we don’t expect growth to return to the pre-pandemic range of 7-8 percent.” – Intelligence Unit of the Economist
Rwanda
Rwanda’s economy has come a long way since the genocide that ripped the country’s economic, political, and social fabric apart in the early 1990s. In 2000, nominal GDP was USD 2 billion, and in 2019, it was USD 10 billion. Despite the fact that the Covid-19 issue has slowed progress in the last year due to fewer FDI and firm closures, our panelists expect real GDP growth to average 6.7 percent from 2021 to 2025. Surge in investment should bolster activity. However, a shaky fiscal position, insufficient domestic savings, and high energy prices all pose dangers. Furthermore, the country’s outstanding development in recent decades has been primarily reliant on Paul Kagame’s leadership; if he were to step down, the country’s future would be much more uncertain.
“In the near to medium term, regime stability appears to be assured.” The Covid-19 pandemic’s interruptions and economic impact appear to have had little impact on public opinion, but issues remain. Developments in neighboring nations, as well as ties with them, remain a potentially destabilizing element. President Paul Kagame’s succession is still a hot topic, and factionalism within the Rwandan Popular Front (RPF) may emerge in the future. If the country is to prevent any shocks, a well-managed transition to greater democracy must remain a top goal.” – Oxford Economics economist Jee-A van der Linde
Vietnam
In recent years, Vietnam has been one of East Asia’s top achievers, owing to a stable political situation, low labor costs, and a relatively talented workforce. The government has had great success attracting foreign direct investment, particularly in the fast-growing electronics and textiles sectors. Due to the trade war between the United States and China, Vietnam has negotiated a number of trade agreements to improve market access for its commodities, notably the Regional Comprehensive Economic Partnership (RCEP) and an FTA with the European Union. Furthermore, the government has managed Covid-19 admirably, nearly eliminating the virus domestically, allowing the economy to grow at one of the quickest rates in the world last year. The manufacturing sector is expected to drive growth in the next years. Downside risks include a potentially slow rebound in visitor arrivals, exposure to external shocks, and the fragile health of leader Nguyen Phu Trong.
“Successful and prompt local containment of the Covid-19 outbreak has allowed business activities in Vietnam to progressively return to “normal,” as seen by the consecutive improvements in various data releases. While the upward trend in economic activity is expected to continue in 2021, the outlook is highly dependent on global pandemic containment and vaccine rollout.Other factors in Vietnam’s favor include a slew of free trade agreements that will help drive exports and investments even higher.current Vietnam’s efforts in digital transformation and promoting e-commerce, as well as the country’s dynamic and abundant workforce, are also positive drivers for the country.
Cambodia
The textile and construction industries have boosted economic activity in recent years, but the economy was struck hard by the pandemic in 2020, and it is expected to decline significantly due to income losses and decreasing tourism earnings. Although high unemployment, strained relations with the EUthe principal market for garment exportsand higher twin deficits represent downside risks, the economy could return to a good growth trajectory this year as the impact of the pandemic fades and FDI continues strong.
“As global production shifts away from China, longer-term growth prospects remain solid, with FDI continuing to stimulate new sector development.” As foreign demand rebounds, the prediction anticipates GDP growth maintaining close to 7% in 2023, fueling a comeback in investment with a substantial FDI component. Domestic income growth, even if politics remains restrictive, defuses anger, and supports net export expansion, which puts the current account deficit on a lower path.” – Chris Portman, Oxford Economics senior economist
Why is GDP increasing so quickly?
As the economy continues to recover from the ravages of the COVID-19 pandemic, US GDP growth surged in the fourth quarter, expanding at a 6.9% annual rate, up from the preceding four quarters’ rate of growth. Increased inventory investment and increased service consumption accounted for all of GDP growth in the fourth quarter. Real GDP increased by 5.5 percent in the first four quarters of 2021, the fastest rate since 1984.
In the fourth quarter, the economy was most likely producing at or near its full potential. The economy was still trending 1.4 percent below pre-pandemic levels. Even if the pandemic had not occurred, the economy is unlikely to have continued to grow at the same rate in 2020 and 2021 as it had in previous years. Prior to the pandemic, forecasters projected a slowdown since the economy was close to or at maximum employment, making it improbable that job gains would continue at the same rate. Furthermore, because of increased deaths and reduced immigration, which resulted in a smaller-than-expected labor force, and low investment, which resulted in a smaller-than-expected capital stock, the pandemic itself has likely lowered potential.
Even while the economy was near to where it would have been had the epidemic and the government’s response not occurred, the economy’s makeup was drastically changed. On the supply side, employment remained low (due to low labor force participation), but this was compensated for by longer average hours and higher productivity. Final expenditures were skewed towards goods and residential investment, rather than services, business fixed investment, inventories, and net exports, on the demand side. In the fourth quarter, the demand side began to take on a more normal composition, but it remained highly skewed.
Consumption (C)
Consumption is the total amount of goods and services purchased by citizens (such as retail products or rent), and it increases as more is consumed. It accounts for the majority of GDP. Professionals typically consider continually increasing consumption to be a sign of a strong economy since it indicates consumer confidence in spending rather than future uncertainty and lack of expenditure.
Investment (I)
Any domestic investment, or capital expenditures, on new assets that will give future advantages is referred to as investment. Companies spend money on equipment, inventory, and the construction of new locations to invest in business activities. The period over which the acquired good or service gives advantages to its purchaser is the difference between consumption and investment.
Higher levels of investment are significant because they enhance productive capacity and employment rates.
Government (G)
Government represents the money spent by the government on goods and services such as education, transportation, military, and infrastructure (consumption expenditure and gross investment). This spending is paid for by taxes and corporate profits, or it is borrowed. The government must collect more money than it spends in order to have a surplus rather than a deficit.
In the aftermath of a recession, when consumer spending and business investment both plummet, government spending becomes even more crucial to examine.
Exports – Imports (X-M)
The exports imports part of the equation refers to goods and services generated in the home economy and sold abroad, minus imports acquired by domestic consumers. This includes all expenditures made by businesses with a physical presence in the country.
The net value of a country’s export (X) is larger than the value of its imports (M), and the country has a trade surplus. In the same way, if M is bigger than X, the country has a trade deficit.
Keep in mind that while GDP ratios aren’t directly comparable between the US and other countries, the formula, criteria, and information used to calculate GDP are universal.
Which component of GDP contributes the most?
Personal Consumption Expenditures are the first category. Consumer spending accounts for over 70% of total production in the United States. That figure was $13.28 trillion in 2019.
What is the world’s fastest expanding industry?
The industry that transports products and passengers across the world’s waterways, Global Deep-Sea, Coastal, and Inland Water Transportation, has seen robust growth for the most of the five years leading up to 2021. Although the COVID-19 (coronavirus) pandemic is expected to severely cut into demand in 2020, rising global per capita income and increased industrial activity among the world’s most developed economies have raised demand for industry services. These favorable market conditions have helped to compensate for an excess of marine carrying capacity compared to downstream demand, which has stifled international freight rates and stifled sector growth. Furthermore, the industry’s revenue has been sustained by the robust…
China’s Economy Prior to Reforms
Prior to 1979, China had a centrally planned, or command, economy under Chairman Mao Zedong’s direction. The state directed and controlled a substantial portion of the country’s economic output, setting production objectives, controlling prices, and allocating resources across the sector. All of China’s individual household farms were collectivized into big communes in the 1950s. During the 1960s and 1970s, the central government made large-scale expenditures in physical and human capital to promote rapid industrialization. As a result, by 1978, over three-quarters of industrial output was produced by centrally controlled, state-owned enterprises (SOEs), with output targets set centrally. Private businesses and foreign-owned businesses were typically prohibited. The Chinese government’s main goal was to make China’s economy largely self-sufficient. In general, foreign trade was confined to obtaining items that could not be manufactured or obtained in China. The economy was distorted as a result of such practices. There were few incentives for firms, workers, and farmers to become more productive or concerned about the quality of what they produced because most aspects of the economy were managed and run by the central government. As a result, there were no market mechanisms to efficiently allocate resources, and thus there were few incentives for firms, workers, and farmers to become more productive or concerned about the quality of what they produced (since they were mainly focused on production goals set by the government).
China’s real GDP grew at an average annual rate of 6.7 percent from 1953 to 1978, according to Chinese government statistics, though the accuracy of these figures has been questioned by many analysts, who contend that Chinese government officials (especially at the subnational levels) often exaggerated production levels for a variety of political reasons during this time. China’s actual average yearly real GDP growth during this period, according to economist Angus Maddison, was around 4.4 percent. 5 Furthermore, China’s economy experienced significant downturns under Chairman Mao Zedong’s leadership, including during the Great Leap Forward from 1958 to 1962 (which resulted in a massive famine and the deaths of up to 45 million people)6 and the Cultural Revolution from 1966 to 1976 (which resulted in a massive famine and the deaths of up to 45 million people) (which caused widespread political chaos and greatly disrupted the economy). China’s per capita GDP doubled between 1950 and 1978 on a purchasing power parity (PPP) basis,7 a typical indicator of a country’s living standards. However, Chinese living standards declined by 20.3 percent between 1958 and 1962, and by 9.6 percent between 1966 and 1968. (see Figure 1). Furthermore, as seen in Figure 2, the rise in Chinese living standards paled in contrast to those in the West, such as Japan.
The Chinese government decided to break with its Soviet-style economic policies in 1978 (shortly after Chairman Mao’s death in 1976) by gradually reforming the economy according to free market principles and opening up trade and investment with the West, in the hopes of significantly increasing economic growth and raising living standards. “Black cat, white cat, what does it matter what color the cat is as long as it catches mice?” said Chinese leader Deng Xiaoping, the architect of China’s economic reforms. 8
The Introduction of Economic Reforms
China started a series of economic reforms in 1979. Farmers were given price and ownership incentives by the central government, allowing them to sell a portion of their harvests on the open market. Furthermore, the government developed four special economic zones along the coast to attract international investment, increase exports, and import high-tech products into China. Additional reforms, implemented in stages, aimed to decentralize economic policymaking in a number of areas, including trade. Provincial and municipal governments were given economic control of diverse firms, and they were generally allowed to operate and compete on free market principles rather than under the direction and guidance of state planning. Citizens were also encouraged to create their own enterprises. More coastal cities and regions have been classified as open cities and development zones, allowing them to experiment with free-market reforms and give tax and trade advantages to attract international investment. Furthermore, state pricing controls on a variety of products were gradually phased off. China’s economic growth was also aided by trade liberalization. Trade obstacles were removed, allowing for more competitiveness and FDI inflows. China’s incremental economic reforms aimed to determine which policies had positive economic effects (and which did not) so that they might be replicated across the country, a process Deng Xiaoping famously referred to as “crossing the river by touching the stones.” 9
China’s Economic Growth and Reforms: 1979-the Present
China’s economy has developed significantly quicker since economic reforms were implemented, and the country has avoided serious economic upheavals for the most part. 10 China’s annual real GDP averaged 9.5 percent from 1979 to 2018. (see Figure 3). As a result, China’s economy has been able to double in size in real terms every eight years on average. The worldwide economic slowdown that began in 2008 had a major influence on China’s economy. Early in 2009, Chinese media stated that 20 million migrant workers had returned home after losing their jobs due to the financial crisis, and that real GDP growth in the fourth quarter of 2008 had slowed to 6.8% year-on-year. The Chinese government responded by enacting a $586 billion stimulus program geared primarily at supporting infrastructure and relaxing monetary policy to boost bank lending. 11 As a result of these efforts, China was able to mitigate the consequences of a dramatic drop in worldwide demand for Chinese goods. China’s real GDP growth averaged 9.7% from 2008 to 2010. However, throughout the next six years, the rate of GDP growth fell, falling from 10.6 percent in 2010 to 6.7 percent in 2016. In 2017, real GDP increased to 6.8%, but fell to 6.6 percent in 2018. (although it rose to 6.8 percent in 2017). China’s real GDP growth will decelerate each year over the following six years, according to the IMF’s April 2019 World Economic Outlook, falling to 5.5 percent in 2024. (Figure 4). 12 Many analysts warn that if the US and China continue to apply punitive economic measures against each other, such as tariff rises resulting from US Section 301 action and Chinese retaliation, China’s economic development may decelerate even further. Increased tariffs on all trade between the US and China, according to the Organization for Economic Cooperation and Development (OECD), could cut China’s real GDP by 1.1 percent in 2021-2022, compared to the OECD’s baseline economic predictions. 13
Figure 4: China’s Real Annual GDP Growth from 2007 to 2018, with Forecasts through 2024
Causes of China’s Economic Growth
Much of China’s quick economic growth is attributed to two key factors: large-scale capital investment (funded by substantial domestic savings and foreign investment) and rapid productivity growth, according to economists. These two elements appear to have worked in concert. Economic changes strengthened the economy’s efficiency, resulting in more output and more resources for new investment.
China has a long history of having a high savings rate. Domestic savings as a percentage of GDP was at 32 percent when reforms began in 1979. During this time, however, the majority of Chinese savings were generated through SOE earnings, which were utilised by the central government for domestic investment. Economic reforms, which included decentralization of economic output, resulted in significant increases in both family and business savings in China. As a result, China has the largest gross savings as a proportion of GDP among major economies. China has been able to support a high level of investment due to its substantial domestic savings. In fact, China’s gross domestic savings greatly outnumber its domestic investment, making it a significant net worldwide lender.
Productivity gains (i.e., advances in efficiency) have been identified as another important element in China’s rapid economic growth by a number of experts. Productivity gains were mostly due to a reallocation of resources to more productive uses, particularly in industries like agriculture, trade, and services that were formerly tightly regulated by the government. Agricultural reforms, for example, increased output, allowing employees to pursue jobs in the more productive manufacturing sector. Non-state companies (such as private corporations) arose as a result of China’s economic decentralization, which tended to pursue more productive activities than centrally controlled SOEs and were more market-oriented and efficient. Furthermore, a larger portion of the economy (mostly the export sector) was subjected to competitive dynamics. Local and provincial governments were given unrestricted authority to form and operate businesses without intervention from the federal government. FDI also introduced new technology and procedures to China, which increased efficiency.
However, as China’s technological development converges with that of major developed countries (i.e., through the adoption of foreign technology), productivity gains and, as a result, real GDP growth may slow significantly, unless China becomes a major center for new technology and innovation and/or implements new comprehensive economic reforms. Several developing economies (most notably in Asia and Latin America) experienced rapid economic development and growth in the 1960s and 1970s by implementing some of the same policies that China has used to develop its economy to date, such as measures to boost exports and promote and protect specific industries. However, at some point throughout their development, some of these countries began to face protracted economic stagnation (or substantially slower growth than prior levels), a situation known as the “middle-income trap” by economists. 14 This means that while several developing (low-income) economies were able to transition to a middle-income economy, they were unable to transition to a high-income economy due to their inability to sustain high levels of productivity gains (in part due to their inability to address structural inefficiencies in the economy). 15 China may be at a comparable fork in the road right now. The World Bank uses a per capita gross national income (GNI) approach to classify economic development levels. 16 According to the World Bank, China transitioned from a low-income to a low-middle-income economy in 1997, and then to an upper-middle-income country in 2010. China’s per capita GNI in 2017 was $8,690, which was 38.7% below the amount required to become a high-income economy. According to the Chinese government, China will be able to cross the high-income level by 2025. It intends to accomplish this, in part, by making innovation a key source of future economic growth. Skeptics argue that China’s innovative development will be difficult to achieve, particularly if it is primarily state-driven and imposes new limitations on foreign companies.
Notes: The red bar represents the level at which China would need to achieve in order to become a high-income economy.
According to the Economist Intelligence Unit (EIU), China’s real GDP growth will drop significantly over the next several decades, eventually catching up to US growth rates by 2037. (U.S. and Chinese real GDP growth rates are both projected at 1.9 percent ). For a few years after that, the EIU expects US GDP growth to outpace China’s (Figure 6). 17
Figure 6: Annual Real GDP Growth Rates in the United States and China from 2010 to 2018 and Projections to 2050
The Chinese government has expressed a desire to shift away from its existing economic model of “rapid growth at any cost” to more “smart” growth, which aims to minimize reliance on energy-intensive and high-polluting industries in favor of high technology, renewable energy, and services. China has also stated that it wishes to achieve more balanced economic growth. (These topics are covered in greater depth later in the report.)
Is GDP a rate of growth?
The GDP growth rate is a measurement of how quickly the economy is expanding. The rate compares the country’s economic output in the most recent quarter to the prior quarter. GDP is a measure of economic output. The current GDP growth rate in the United States is 6.9%.
Why did the GDP rise in 2021?
Retail and wholesale trade industries led the increase in private inventory investment. The largest contributor to retail was inventory investment by automobile dealers. Increases in both products and services contributed to the increase in exports. Consumer products, industrial supplies and materials, and foods, feeds, and beverages were the biggest contributions to the growth in goods exports. Travel was the driving force behind the increase in service exports. The rise in PCE was primarily due to an increase in services, with health care, recreation, and transportation accounting for the majority of the increase. The increase in nonresidential fixed investment was mostly due to a rise in intellectual property items, which was partially offset by a drop in structures.
The reduction in federal spending was mostly due to lower defense spending on intermediate goods and services. State and local government spending fell as a result of lower consumption (driven by state and local government employee remuneration, particularly education) and gross investment (led by new educational structures). The rise in imports was mostly due to a rise in goods (led by non-food and non-automotive consumer goods, as well as capital goods).
After gaining 2.3 percent in the third quarter, real GDP increased by 6.9% in the fourth quarter. The fourth-quarter increase in real GDP was primarily due to an increase in exports, as well as increases in private inventory investment and PCE, as well as smaller decreases in residential fixed investment and federal government spending, which were partially offset by a decrease in state and local government spending. Imports have increased.
In the fourth quarter, current dollar GDP climbed 14.3% on an annual basis, or $790.1 billion, to $23.99 trillion. GDP climbed by 8.4%, or $461.3 billion, in the third quarter (table 1 and table 3).
In the fourth quarter, the price index for gross domestic purchases climbed 6.9%, compared to 5.6 percent in the third quarter (table 4). The PCE price index climbed by 6.5 percent, compared to a 5.3 percent gain in the previous quarter. The PCE price index grew 4.9 percent excluding food and energy expenses, compared to 4.6 percent overall.
Personal Income
In the fourth quarter, current-dollar personal income climbed by $106.3 billion, compared to $127.9 billion in the third quarter. Increases in compensation (driven by private earnings and salaries), personal income receipts on assets, and rental income partially offset a decline in personal current transfer receipts (particularly, government social assistance) (table 8). Following the end of pandemic-related unemployment programs, the fall in government social benefits was more than offset by a decrease in unemployment insurance.
In the fourth quarter, disposable personal income grew $14.1 billion, or 0.3 percent, compared to $36.7 billion, or 0.8 percent, in the third quarter. Real disposable personal income fell 5.8%, compared to a 4.3 percent drop in the previous quarter.
In the fourth quarter, personal savings totaled $1.34 trillion, compared to $1.72 trillion in the third quarter. In the fourth quarter, the personal saving rate (savings as a percentage of disposable personal income) was 7.4 percent, down from 9.5 percent in the third quarter.
GDP for 2021
In 2021, real GDP climbed 5.7 percent (from the 2020 annual level to the 2021 annual level), compared to a 3.4 percent fall in 2020. (table 1). In 2021, all major subcomponents of real GDP increased, led by PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports have risen (table 2).
PCE increased as both products and services increased in value. “Other” nondurable items (including games and toys as well as medications), apparel and footwear, and recreational goods and automobiles were the major contributors within goods. Food services and accommodations, as well as health care, were the most significant contributors to services. Increases in equipment (dominated by information processing equipment) and intellectual property items (driven by software as well as research and development) partially offset a reduction in structures in nonresidential fixed investment (widespread across most categories). The rise in exports was due to an increase in products (mostly non-automotive capital goods), which was somewhat offset by a drop in services (led by travel as well as royalties and license fees). The increase in residential fixed investment was primarily due to the development of new single-family homes. An increase in wholesale commerce led to an increase in private inventory investment (mainly in durable goods industries).
In 2021, current-dollar GDP expanded by 10.0 percent, or $2.10 trillion, to $22.99 trillion, compared to 2.2 percent, or $478.9 billion, in 2020. (tables 1 and 3).
In 2021, the price index for gross domestic purchases climbed by 3.9 percent, compared to 1.2 percent in 2020. (table 4). Similarly, the PCE price index grew 3.9 percent, compared to 1.2 percent in the previous quarter. The PCE price index climbed 3.3 percent excluding food and energy expenses, compared to 1.4 percent overall.
Real GDP rose 5.5 percent from the fourth quarter of 2020 to the fourth quarter of 2021 (table 6), compared to a 2.3 percent fall from the fourth quarter of 2019 to the fourth quarter of 2020.
From the fourth quarter of 2020 to the fourth quarter of 2021, the price index for gross domestic purchases grew 5.5 percent, compared to 1.4 percent from the fourth quarter of 2019 to the fourth quarter of 2020. The PCE price index climbed by 5.5 percent, compared to 1.2 percent for the year. The PCE price index increased 4.6 percent excluding food and energy, compared to 1.4 percent overall.
Source Data for the Advance Estimate
A Technical Note that is issued with the news release on BEA’s website contains information on the source data and major assumptions utilized in the advance estimate. Each version comes with a thorough “Key Source Data and Assumptions” file. Refer to the “Additional Details” section below for information on GDP updates.
What is the most crucial economic component?
Consumer spending is frequently mentioned in the media as being critical to the overall health of the US economy, but how significant is it? Consumptionthe almighty consumeris the primary driver of economic growth in the United States, accounting for around two-thirds of total GDP. American shoppers are responsible for about $12 trillion of the nearly $18 trillion in GDP in the United States in 2015.
The Bureau of Economic Analysis tracks consumption and publishes data as Personal Consumption Expenditures (PCE) in its monthly “Personal Income and Outlays” news release. PCE as a percentage of overall GDP has risen steadily from the late 1960s, from around 58 percent to nearly 70 percent today.
PCE is split into two categories: commodities and services. Over the last two years, the services category has made up the majority of PCE, accounting for more than 65 percent. Health care, utilities, recreation, and financial services are examples of services.
Goods are further divided into durable and nondurable categories. Durable goods are those that have a three-year average lifespan. Automobiles, appliances, and furniture are only a few examples. Clothing, food, and gasoline are examples of nondurable products, which have an average life duration of less than three years.
Durable items account for roughly 10% of total PCE, whereas nondurable things account for roughly 20%.
So, the next time you go shopping for anything from ketchup to a new car, remember that you’re helping to drive our country’s progress.
What are the most crucial aspects of economic development?
Economists claim that economic growth is fueled by three factors: increased labor, increased capital, and increased efficiency in the use of labor and capital. However, in order to enhance any of the above-mentioned sources of growth, someone must decide to invest. And, in a capitalist system, it is mostly company executives that invest, rather than governments. As a result, if managers opt to invest, the economy expands. If they don’t, though, the process slows.