reader john h. Ask “Are there US net GDP forecasts that include defense capital depreciation?”. To the question I think is being asked (often called NDP, or Net Gross Domestic Product), the answer is actually yes.
That’s because the two act in tandem for the United States in peacetime.
figure 1: GDP (black bold), gross domestic product (blue), are deflated using the GDP deflator, and the unit is billions. 2012 $SAAR. NDP is BEA series A362RC1Q027SBEA. Recession peak-to-trough dates as defined by NBER are grayed out. Source: BEA, 2nd Edition Q2 2023, via FRED, NBER and author’s calculations.
It’s hard to see that the two series correspond almost one-to-one, so I show the log first order difference of the two series for 1986-2023.
figure 2: GDP (bold black), first log difference of GDP (blue), both deflated using the GDP deflator, in billions. 2012 $SAAR. NDP is BEA series A362RC1Q027SBEA. Recession peak-to-trough dates as defined by NBER are grayed out. Source: BEA, 2nd Edition Q2 2023, via FRED, NBER and author’s calculations.
Now, since the consumption of defense equipment capital is much smaller than the total consumption of fixed capital (public and private), we can be confident that the projections for GDP and NDP growth are essentially the same. The consumption of defense equipment in 2021 is 77.8 billion US dollars in 2012, and the consumption of fixed investment in 2021 is 3,310.9 billion US dollars in 2012.
Here is a picture of total investment in defense equipment and capital consumption.
image 3: Total defense equipment investment (bold black) and capital consumption (blue), in billions. Recession peak-to-trough dates as defined by Ch.2012$.NBER are shown in gray. Source: BEA 2023Q2 2nd Edition, Tables 5.2.6 and 5.9.6, NBER, author’s calculations.
JohnH’s query was made by me Discuss Russia’s GDP growth rate excluding defense, specifically my guess on the depreciation portion of defense spending. I would venture to say that Russia’s military equipment depreciates much more than the US (in proportion to the size of the economy) because (1) Russia is currently in an all-out war and (2) the US is not.
