Gross Domestic Product (“GDP”) is a measure of the total amount of goods and services produced within an area in a given time period. As a matter of accounting, GDP is the sum of all consumption, investment, government spending and net exports in the economy. The Bureau of Economic Analysis (“BEA”) calculates GDP using data from several other government agencies. For quarterly releases, they make seasonal adjustments to smooth out predictable changes (e.g. there is usually an increase in expenditures around the holiday season).There are two different flavors to GDP: nominal and real. Nominal GDP is the simplest: it’s the total market value of goods and services. Real GDP is nominal GDP but adjusted for inflation. Most headlines focus on real GDP since it better represents how much “stuff” is produced, while monetary economists often focus on nominal GDP.Calculating GDP has its challenges, stemming from how to calculate the value of goods and services that are produced. The BEA uses the market value of goods, so if a consumer buys a $10 widget then the GDP rises $10. But some economic activities are off-market. For example, if someone looks after their child for 8 hours, then the GDP is unchanged since no money changed hands. But if that same person pays $150 for a babysitter for that same 8 hours, then the GDP will rise $150, even though the same amount of economic activity took place. Economists also have to be careful not to double-count activity. If a company produces a $10 widget in one year, and sells it in the next year, what year should the widget production count in? For what it’s worth, BEA economists have decided it counts for the first year when it was produced, where it counts as a $10 investment, and in year two the $10 increase in consumption is perfectly offset by $10 in negative investment (inventory drawdowns count against GDP) so the net change is $0 in year two. Others note that GDP does not perfectly capture the strength of the economy, since activity could be unequally distributed and total activity does not perfectly correlate to other important measures like health and happiness.
Release Schedule: https://www.bea.gov/news/schedule (roughly four weeks after the end of the quarter)Frequency: Quarterly, with three monthly revisions