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What does GDP have to do with the heritage industry?

January 27, 2012 1 comment

Today the U.S. government released the advanced estimates for 2011 economic statistics. Real gross domestic product (GDP) increased 1.7 percent from 2010 (2010 GPD was 3.0 percent). GDP is, generally, a good proxy for the amount of “undertakings” (Section 106 language) undertaken. This is an  important metric  for the heritage compliance sector in the U.S.  If your firm uses revenue as a growth metric, you should discount your annual growth by 1.7 percent to account for market growth if you want to track your firm’s market share. For example, if your revenue increased by 1.7 percent last year, your market share did not increase because the size of the market increased by 1.7 percent.

Note, however, a couple of other trends. First, industry growth tends to lag patterns of change in GDP growth by 18 months in both directions. That is, when GDP goes up, it takes about 18 months for that change to be realized in the heritage industry. The same is true for a downturn in GDP. This pattern is not absolute, but the correlation is very strong.  Second, since 1999 industry growth has substantially exceeded GDP growth on an annual basis in almost every year. For 2011, industry growth was just under 4 percent (as reported by Environmental Business Journal). So, in measuring your firm’s market share for last year, you may actually want to adjust by 4 percent instead of 1.7 percent.

Measuring absolute market share of your firm in the U.S. compliance sector of the heritage industry is difficult because there are not good numbers on the absolute size of the market. However, using change in GDP or the overall environmental consulting industry is a way of measuring and tracking relative change in your firm’s market share from year to year.

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