US National Defense Spending — % of GDP

## What this measures

US national defense consumption and investment as a share of nominal GDP, quarterly. It captures spending on military equipment, depreciation of existing hardware, and operations, but excludes military pensions.

## Background

Computed by /api/cron/fred-composites on the 5th of each month: FRED FDEFX (national defense consumption expenditures and gross investment, nominal SAAR) divided by FRED GDP (nominal SAAR), times 100. NIPA counts depreciation of existing equipment as consumption and leaves out military pensions, so it measures something different from budget-outlay figures and from the COFOG general-government measure (defense.cofog.pct_gdp.usa), which read lower (3.1% of GDP on COFOG against 3.7% here for 2024). Use this series for the quarterly trend and the COFOG series (defense.cofog.pct_gdp.*) for comparisons between countries.

## Why it matters

Defense spending shifts procurement cycles, labor markets and industrial capacity in aerospace, shipbuilding, electronics and logistics. Budget allocations signal where governments expect geopolitical risk to rise or fall. A rising share can crowd out other fiscal priorities or coincide with periods when allies increase their own outlays.

## How to read it

A rising share means defense is claiming more of the economy, either because nominal spending grows faster than GDP or because GDP growth slows. Compare it with the COFOG measure (defense.cofog.pct_gdp.usa) to separate accounting differences from real shifts in military outlay.

## What it does not say

It does not include military pensions or veterans' benefits, and its treatment of depreciation means it runs about 0.3 percentage points above budget-based measures. It does not break out which services, programs or regions receive funding.

## Source

Palanor pulls this series from the FRED API nightly. It is computed by dividing FRED series FDEFX by GDP and multiplying by 100; both series come from the Bureau of Economic Analysis.