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Gross Domestic Product (GDP)

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Gross Domestic Product (GDP) Empty Gross Domestic Product (GDP)

Post  Admin on Wed May 03, 2017 7:34 am

The most important indicator is the GDP report. Basically, the GDP is the broadest measure of the state of an economy. The GDP is an aggregate monetary value of all the goods and services produced by the entire economy during a quarter (excluding international activity).
The key number to look at is the GDP growth rate. Generally, deviations from the normal level can prove to be rather influential. Growth above this level is often thought to be unsustainable and a precursor to high inflation, while growth below this range (and especially negative growth) means that the economy is running slowly, which can lead to increased unemployment and lower spending. It is worth noting that each initial GDP report will be revised twice before the final figure is settled upon: the advance report is followed by the preliminary report about a month later and a final report a month after that. Significant revisions to the advance number can cause additional ripples on the markets.

Do not confuse Gross Domestic Product with Gross National Product (GNP). GDP includes only goods and services produced within the geographic boundaries of a country, regardless of the producer's nationality. GNP does not include goods and services produced by foreign enterprises, but does include goods and services produced by national firms operating in foreign countries.

For example, if a U.S. firm was operating a chain of stores in France, the goods and services produced by those stores would not be included in the GDP, but would be included in the GNP. As the global economy grows, the difference in GDP and GNP is decreasing for developed countries like the U.S. But for smaller, developing countries, the difference can be substantial.

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