When it comes to assessing the economic health of a country, GDP (gross domestic product) is often the measure of choice. This is because it tells you the market value of all final goods and services produced in a nation or region over a certain period of time.
However, GDP growth alone is not the be all and end all when it comes to understanding a country’s economy. It is important to remember that GDP growth can be misleading, as it does not tell you whether the gains are being shared evenly by all citizens or if only the wealthiest are getting richer. In order to understand how much a rise in GDP actually means for the average citizen, you need to look at real GDP growth, which is calculated by dividing nominal GDP by a price deflator.
There are two main ways to calculate GDP: the production method and the expenditure approach. The former adds up the output of all industries using basic prices, while the latter sums up all expenditure on finished products and services including consumption, investment, government spending and net exports. It is through the last category that you can see how a country’s GDP grows or shrinks depending on its trade balance with other countries – imports and exports.
The Bureau of Economic Analysis (BEA) releases national income and product accounts every quarter that provide the raw data used to calculate GDP in the United States. These are compiled from seven summary accounts that trace receipts and outlays for businesses, households, nonprofit organizations and the government. BEA also produces detailed GDP reports for state and industry that use the same data as these summary accounts. These reports are available in FRED, the St. Louis Fed’s signature economic database.