FXstreet.com (Barcelona) - Paul Ashworth, Chief US Economist at
Capital Economics feels that the inclusion later this year of
capitalised research and development (R&D) expenditure in the
national accounts will boost the level of GDP by up to 3%, with
most of that additional spending being added to business
investment.
He adds, the inclusion of a corresponding stock of R&D will
also boost measures of the nation's capital stock. We don't
anticipate any major changes to recent GDP growth, but it is
possible that the recent recession could end up looking even worse.
Ashworth notes that as part of the 2013 comprehensive revision to
the national accounts, to be published in late July, R&D
spending will be capitalised, along with some other intangibles,
meaning that the flow of expenditure will be added to the
investment figures for businesses and government. This will raise
the level of GDP, although recent growth rates should be largely
unaffected. He warns that conspiracy theorists will no doubt be up
in arms that the level of GDP is being arbitrarily raised, but the
US is only making these changes to comply with the latest UN-agreed
standards for national accounts.
He writes, "The US has already published satellite R&D accounts
that show spending was equivalent to roughly 3.0% of GDP in 2007,
which is unfortunately the most recent data point. Figures from the
OECD suggest that the share is a little lower on average, largely
because of definitional differences, but also indicate that share
continued to rise in 2008 and 2009. The US will benefit more than
other countries from this change in national accounts methodology
because it spends an above average share of GDP on R&D. That
said, Israel, Sweden and Korea will be the big winners."
He continues to explain that like other types of private
investment, R&D tends to be more volatile that the rest of GDP
over the economic cycle, so it's possible that incorporating it
will make the recent recession look even worse. Back in the 1960s,
he highlights that the US government accounted for more than
two-thirds of R&D spending, with the private sector lagging far
behind. Nowadays, however, the position is reversed, with the
private sector accounting for two-thirds of total expenditure,
which is mostly on applied rather than basic research. Business
sector R&D growth was particularly strong during the second
half of the 1990s. As for 2013, Ashworth finishes by noting that
budget cutbacks mean that government R&D spending will probably
contract, but we anticipate a rise in private-sector spending, led
by increases in the oil and gas sector.