by Mish

GDP and GDI are both the same measure of the same thing, but leads and lags apply.

Real private investment (not to be confused with income) is a measure of investment in the real economy, not under the influence of massive amounts of government spending.

Real GDPI Percent Change From Year Ago

Image placeholder title

Negative GPDI is strongly associated with recessions. After dipping into negative territory recently, it is now at a weak year-over-year reading of +0.098%.

Real GDI Percent Change From Previous Quarter

Image placeholder title

Real GDI Percent Change From Previous Quarter

GDI is the sum of all income earned while producing goods and services within a nation’s borders. It differs from gross domestic product (GDP), which gauges economic activity based on expenditure.

Negative GDI is also strongly associated with recessions.

Investopedia provides this Explanation of GDI.

GDI is calculated as the total income payable in GDP income accounts. It can be calculated in two ways:

  1. GDI = compensation of employees + gross operating surplus + gross mixed income + taxes – subsidies on production and imports
    Compensation of employees encompasses the total compensation to employees for services rendered. Gross operating surplus, also known as profits, refers to the surpluses of incorporated businesses. Gross mixed income is the same as gross operating surplus, but for unincorporated businesses.
  2. GDI = rental income + interest income + profits + wages + statistical adjustments
    Statistical adjustments may include corporate income tax, dividends and undistributed profits.

Combining GDI and GPDI

Real GDI and Real GPDI are frequently not in sync. When one is negative, quite often the other one isn’t.

GDI, GPDI Quarter-Over-Quarter

Image placeholder title

The above chart is very difficult to read due to scale differences between the two series.

Nonetheless, its easy to see that a strong recession signal is present when both GDI and GPDI are negative. That currently is not the case now. Both are positive.


  1. Real gross private investment normally accounts for only 13-16% or so of GDP. Private investment is a very volatile, but important portion of GDP. In contrast, government spending including transfer payments is typically steady.
  2. If businesses investment is expanding, that’s a sign of confidence in the economy and portends future hiring.
  3. Rising real incomes means consumers have increasing purchasing power. When consumers have more money, they are highly likely to spend.
  4. The combination of falling real incomes with falling business investment says businesses aren’t spending, and consumers cannot spend more without going deeper in debt.


This indicator sometimes seems to lead and sometimes seem to lag. The lags are easy to understand. Data only comes out quarterly.

The combination does provide a nice spot check. If either real GDI or GPDI is positive, the economy is not likely to be in recession.

Mike “Mish” Shedlock

Real GDI, GPDI Recession Indicators Take II

On September 30, I posted some charts of Real Gross Domestic Income and Real Gross Private Domestic Investment.

Real GDI Provides Strong Recession Warning

Yesterday the BEA released its Third Estimate for Second Quarter GDP.

Real 3rd-Quarter GDP 3.0%, Inventories Provide Boost: Personal Income Decelerates

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of 2017, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.1 percent.

Real GDP Increases 2.9% Led by Exports; Expect Revisions

Real GDP rose at a seasonally adjusted annualized rate (SAAR) if 2.9% according to the BEA’s Advance Estimate.

1st Quarter GDP Estimates: ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit

On Friday, April 28, the BEA will release its preliminary estimate for first quarter GDP.

Third Estimate of 4th Quarter GDP is 2.1%

Given that GDP is one of the most revised measures, the BEA renamed “final” to “third”. The third estimate is 2.1% just a tick over the Econoday consensus estimate of 2.0%.

Personal Income Up But Real Consumer Spending Declines Second Month

The BEA’s Personal Income and Outlays report shows personal income rose 0.4% but consumer spending rose a scant 0.1% in February.

Hype Over GDP Statistical Noise

The BEA’s second estimate of Third Quarter GDP came in at 3.2% up from 2.9% in the advance (first) estimate.

Make Less, Spend More: Real Income Declines but Spending Jumps in March

The BEA finally caught up with the government shutdown. It released February and March spending and income data today.