Gross Domestic Product (GDP)

Gross Domestic Product is a measure of the total production and consumption of goods and services in the U.S. GDP components like consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's behavior. There are two complementary measures of GDP: one based on income and one based on expenditures. Theoretically, these two measures should be equal. However, due to problems collecting data, there is often a discrepancy. A deflator is used to convert output measured at current prices into constant-dollar GDP. This report provides the single most encompassing picture of economic activity available. It also provides estimates of output based on both demand and supply. Combined with employment data, GDP gives an important measure of productivity growth. A big increase in inventories indicates that supply outstripped demand, which has negative implications for future growth. This data is used to define business cycle peaks and troughs. Total GDP growth between 2.0% and 2.5% is generally considered to be optimal when the economy is at full employment (unemployment rate between 5.5% and 6.0%). Higher growth than this leads to accelerating inflation, while lower growth indicates a weak economy. While GDP is the broadest measure of economic activity, because the data is generally well anticipated, it usually does not move the markets; and because data is released on a quarterly basis, it is not as timely as monthly indicators of economic activity. Measurement biases of prices probably results in an underestimation of real output growth and productivity, particularly for production of services. Data is not available regionally. Gross Domestic Product is scheduled for release at 7:30 (CST) every quarter with monthly revisions by the Bureau of Economic Analysis.

POTENTIAL IMPACT ON INTEREST RATES: MODERATE