Economics Question for DUers

Say that my wife's company up the road produces widgets in Mexico and then sells them in Brazil. If they produce 5% more widgets this month than last, does their contribution towards the GDP go up?
Also, if before shipping them to Brazil, they first send them across the river to sit in a wharehouse in Texas overnight, when they eventualy get sent off to Brazil, does this count as an export?
Curious what you all think.

Goods in transit are not counted as exports. Unless the contect of the goods is primarily of US origin.

Could you explain what that means ... could source of raw material qualify?

An increase in the number of widgets produced would only increase GDP if the total dollar amount of widgets produced and sold increases. One could sell 5% more widgets for 10% less and end up with a decrease in contribution to GDP.

Assume the price is flat in this hypothetical exercise. If 5% more widgets sold for 5% more dollars does GDP go up 5% even though the widgets never touched US soil (excpet for the overnight in the warehouse)? :)

but it does affect gnp.

gdp is what's produced within america's borders regardless of who does it;
gnp is what's produced by americans regardless of where it's done.

on edit: to clarify, it doesn't affect our gdp, but it DOES affect mexico's gdp.

So companies are required to breakout this data? What about if the widgets require several process steps along the way. Say initial fabrication is done stateside and final assembly occurs offshore?

On edit: Im trying to get to the bottom of this mysterious booming economy :)

the value added by initial fabrication goes toward that country's gdp, and the value added by final assembly goes toward the other country's gdp. if a multinational company actually sold the fabricated-but-not-assembled widget to an affiliated entity in the other country, then the economist could do this.

in practice, however, multinationals jigger the internal prices to minimize taxation and/or to show profits at the more visible entities.

for example, the entity that turns raw materials into fabricated but not assembled widgets might sell to the assembling entity at cost, so all the profit is realized in the assembling country; or, it can sell it near the retail price, so that all the profit is realized in the first country.

economists are generally stuck with whatever the company publishes, although they can make some educated guesses in order to refine the numbers.

parts of the economy are indeed booming. energy, obviously; defense contractors and anyone else feeding off the banana republican treasury raid as well.

also remember that the boom is in gdp, which means it doesn't matter that the goods are produced in india or china, just so long as an american realizes the profit. so, offshoring helps gdp by enabling american owners to produce more. it hurts gNp, but we don't hear much about that these days.

another interesting effect is that gdp is essentially adjusted for inflation (technically called the gdp deflator). fine in theory, but lately the government has been fiddling about with the inflation statistics. in particular, if a good cost $100 last year and $108 this year, the old formula called that 8% inflation. in the new formula, however, they can adjust this is this year's good is "superior" in some way to last year's model. so they might say that $6 of the $8 price increase was due to improvements in the product. the classic example is car air bags. one year, they didn't have them, then next year they did. so some of the price increase was due to getting a car with air bags instead of a car without air bags.

this approach is not only obviously subject to manipulation (vendors ALWAYS say their product is better than it was last year), but even in theory it is problematic. for instance, if i can still buy a new car without air bags, but choose to buy one with, well, then the adjustment makes some sense. but because buying a new car without air bags is not an option, my cost for transportation has gone up even if i don't care about the aig bags.

there are other ways they are manipulating the economic statistics. check out http://www.gillespieresearch.com/cgi-bin/bgn/ if you want to do more digging.

Greatly appreciated.