Intermediate Consumptino

Intermediate consumption

Conceptually, the aggregate "intermediate consumption" is equal to the amount of the difference between Gross Output (roughly, the total sales value) and Net output (gross value added or GDP). In the US economy, total intermediate consumption represents about 45% of Gross Output. The services component in intermediate consumption has grown strongly in the US, from about 30% in the 1980s to more than 40% today. Thus, intermediate consumption is an accounting flow which consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses. Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.

Intermediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net output by sector of activity. However, sometimes more detail is available in sectoral accounts of income & outlay (e.g. manufacturing), and from input-output tables showing the value of transactions between economic sectors.

Contents

Excluded from intermediate consumption in the UNSNA system are:

* The value of the depreciation of fixed assets.

* valuables bought by enterprises such as works of art, precious metals and stones, ornaments and jewellery.

* Major renovations, reconstructions, or enlargements of existing fixed assets enhancing their efficiency or capacity, or prolonging their expected working lives.

* Military weapons such as rockets, missiles and their warheads which are actually used in fighting, and military machinery and equipment of the same type as that used by civil establishments for non-military purposes.

* Collective services provided by the public sector (the provision of transport facilities, security, etc.)....