<p>The authoritative source here is the <a href="https://unstats.un.org/unsd/nationalaccount/sna.asp" rel="nofollow noreferrer">United Nations System of National Accounts</a>, SNA.</p>

<p>Change in inventories are indeed part of what we normally call Investment. First, for clarification, the definition of "change in inventories", taken from page 108 of <a href="https://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf" rel="nofollow noreferrer">SNA, version 2008</a>:</p>

<blockquote>
  <p>The basic principle underlying the measurement of changes
  in  inventories  of  finished  goods  is  that  <strong>output  should  be
  recorded at the time it is produced</strong> and valued at the same
  price  <strong>whether  it  is  sold,  otherwise  used  or  entered  into
  inventories for sale or use later</strong>. In effect, goods only enter
  inventories when they are not immediately used
   for sale or other use in the period they
   are produced. Similarly, goods are  withdrawn  from  inventories  when  the  demand  for  the
  goods exceeds the amount produced in a period. <strong>No output
  is recorded when goods produced previously are withdrawn
  from  inventories  and  sold</strong>  or  otherwise  used  unless  a
  storage activity as described be low in section F takes place. </p>
</blockquote>

<p>Second, the components of "Investment" (officially called Gross capital formation), as stated in page 282 of the aforementioned document is:</p>

<blockquote>
  <p>There are three types of capital formation to be examined,
  gross  fixed  capital  formation,
    changes  in  inventories  and
  acquisition less disposal of valuables. </p>
</blockquote>

<p>This and following pages go about explaining each of them, and how to measure them. </p>

<p>Finally, the document provides a worked example of the table of "uses of output" (the expenditure approach of GDP). Here is a screenshot of a section of that worked example, presented in page 291. You can see that change in inventories are indeed treated as part of "Gross Capital Formation":</p>

<p><a href="https://i.sstatic.net/2PSX8.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/2PSX8.png" alt="enter image description here"></a></p>

CC BY-SA 3.0
2017-05-01T09:52:05.897Z
2017-05-01T09:52:05.897Z
luchonacho
<p>GDP calculated using expenditure apporach is like this:
GDP=C+I+G+(X-M)
However on this site:
<a href="http://www.singstat.gov.sg/statistics/visualising-data/charts/share-of-gdp-by-expenditure" rel="nofollow noreferrer">http://www.singstat.gov.sg/statistics/visualising-data/charts/share-of-gdp-by-expenditure</a></p>

<p>The data is avaialable for C, G and net exports, but there are two variables: Gross Fixed Capital Formation and Changes In Inventories. Since there is no 'I' variable, can I assume that the sum of those two variables are equal I?</p>

CC BY-SA 3.0
2017-04-29T18:32:58.043Z
What's stopping you from doing so? Why do you think that it is or it isn't part of I?
Toby
CC BY-SA 3.0
2017-04-30T11:47:46.397Z
Given that all other variables are the same then i suppose that those two might equal I, however im not sure thats why I ask
Alex T
CC BY-SA 3.0
2017-04-30T21:38:42.590Z
Those are certainly components of investment. I am unsure whether there is something missing. If all the numbers shown add up to 100%, then you seem to be right. You would need to get a guide from the statistical agency to get a more authoritative answer.
Brian Romanchuk
<macroeconomics><gdp>
GDP in expenditure approach
Alex T
# GDP in expenditure approach

(Asked by: username_0 on 2017-04-29)

GDP calculated using expenditure apporach is like this:
GDP=C+I+G+(X-M)
However on this site:
<http://www.singstat.gov.sg/statistics/visualising-data/charts/share-of-gdp-by-expenditure>

The data is avaialable for C, G and net exports, but there are two variables: Gross Fixed Capital Formation and Changes In Inventories. Since there is no 'I' variable, can I assume that the sum of those two variables are equal I?

**Tags:** macroeconomics, gdp

> **Comments:**
> **username_1**: What's stopping you from doing so? Why do you think that it is or it isn't part of I?  
> **username_0**: Given that all other variables are the same then i suppose that those two might equal I, however im not sure thats why I ask  
> **username_2**: Those are certainly components of investment. I am unsure whether there is something missing. If all the numbers shown add up to 100%, then you seem to be right. You would need to get a guide from the statistical agency to get a more authoritative answer.  

---

## 1 answers

### Answer by username_3 on 2017-05-01. Score: 2 | Accepted answer

The authoritative source here is the [United Nations System of National Accounts](https://unstats.un.org/unsd/nationalaccount/sna.asp), SNA.

Change in inventories are indeed part of what we normally call Investment. First, for clarification, the definition of "change in inventories", taken from page 108 of [SNA, version 2008](https://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf):

> The basic principle underlying the measurement of changes
> in inventories of finished goods is that **output should be
> recorded at the time it is produced** and valued at the same
> price **whether it is sold, otherwise used or entered into
> inventories for sale or use later**. In effect, goods only enter
> inventories when they are not immediately used
> for sale or other use in the period they
> are produced. Similarly, goods are withdrawn from inventories when the demand for the
> goods exceeds the amount produced in a period. **No output
> is recorded when goods produced previously are withdrawn
> from inventories and sold** or otherwise used unless a
> storage activity as described be low in section F takes place.

Second, the components of "Investment" (officially called Gross capital formation), as stated in page 282 of the aforementioned document is:

> There are three types of capital formation to be examined,
> gross fixed capital formation,
> changes in inventories and
> acquisition less disposal of valuables.

This and following pages go about explaining each of them, and how to measure them.

Finally, the document provides a worked example of the table of "uses of output" (the expenditure approach of GDP). Here is a screenshot of a section of that worked example, presented in page 291. You can see that change in inventories are indeed treated as part of "Gross Capital Formation":

[![enter image description here](https://i.sstatic.net/2PSX8.png)](https://i.sstatic.net/2PSX8.png)


---

