- The BEA’s interactive data tool has historical time series for these estimations.
- Register for BEA’s data application programming interface to have access to BEA data (API).
- Refer to our monthly online publication, the Survey of Current Business, for further information on BEA statistics.
- NIPA Handbook: U.S. National Income and Product Accounts Concepts and Methods
The value of the products and services generated by the nation’s economy less the value of the goods and services used up in production is known as gross domestic product (GDP) or value added. Personal consumption expenditures, gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment are all included in GDP.
The sum of earnings earned and costs incurred in the production of GDP is known as gross domestic income (GDI). GDP and GDI are theoretically equivalent in national economic accounting. GDP and GDI differ in practice because they are calculated using mostly independent source data.
The value of products and services generated by a country’s economy is referred to as gross output. Industry sales or receipts, comprising sales to ultimate consumers (GDP) and sales to other industries, are mostly used to calculate it (intermediate inputs).
Estimates in current dollars are evaluated using the prices in effect at the time the transactions took place, or at “market value.” Also known as “current-price estimates” or “nominal estimates.”
Real values are estimates that have been corrected for inflation, i.e., estimates that do not include the effects of price fluctuations.
The price of final products and services purchased by U.S. residents is measured by the gross domestic purchases price index.
The price of goods and services purchased by, or on behalf of, “persons” is measured by the personal consumption expenditure price index.
Personal income is the money earned by, or on behalf of, all people from a variety of sources: working as a worker, owning a property or business, holding financial assets, and receiving money from the government or businesses in the form of transfers. It comprises income from both domestic and international sources. It excludes capital gains and losses, both realized and unrealized.
Individuals’ disposable personal income is the money they have available to spend or save. It’s the difference between personal income and personal current taxes.
The sum of personal consumption expenditures, personal interest payments, and personal current transfer payments is known as personal outlays.
Personal savings is personal income minus personal expenses and current taxes.
Personal savings as a percentage of disposable personal income is referred to as the personal saving rate.
Corporate profits with inventory valuation adjustment (IVA) and capital consumption (CCAdj) adjustment in the National Income and Product Accounts (NIPAs) is a measure of net income before income taxes that is compatible with the value of goods and services represented in GDP. The IVA and CCAdj are adjustments that translate inventory withdrawals and fixed asset depreciation recorded on a tax-return, historical-cost basis to the national income and product accounts’ current-cost economic measures. Profits for domestic industries indicate profits for all firms operating within the United States’ geographic limits. The difference between earnings collected from ROW and profits given to ROW is the rest-of-the-world (ROW) component of profits.
Annual rates vs. quarterly rates Unless otherwise stated, quarterly seasonally adjusted figures are provided at yearly rates. For BEA’s featured, seasonally adjusted metrics, this standard is utilized to make comparisons with relevant and historical data easier. See the FAQ “Why does BEA publish estimates at yearly rates?” for more information. Only quarterly rates are used to express non-seasonally adjusted numbers.
Changes in percentage. Unless otherwise noted, percent changes in quarterly seasonally adjusted figures are displayed at annual rates. The FAQs “How is average annual growth calculated?” and “Why does BEA publish percent changes in quarterly series at annual rates?” provide more information. Quarterly not seasonally adjusted values are compared to the same quarter a year ago to calculate percent changes. All reported percentage changes are based on unrounded data.
Quarters and calendar years Annual and quarterly data are presented on a calendar basis unless otherwise stated.
Quantities and prices are important. Quantities, sometimes known as “real” volume measures, and prices are stated as index numbers with a reference year of 100. (currently 2012). A Fisher-chained weighted method that integrates weights from two consecutive eras is used to construct quantity and price indexes (quarters for quarterly data and annuals for annual data). Refer to Chapter 4: Estimating Methods in the NIPA Handbook for more information on how to calculate quantity and price indices.
The quantity index is multiplied by the current dollar value in the reference year (2012), then divided by 100 to get chained-dollar values. The principle of percent changes determined from real quantity indexes and chained-dollar levels is the same; any variations are due to rounding. Because the relative weights for a specific period differ from those of the reference year, chained-dollar values are not additive. A “residual” line illustrates the difference between the sum of detailed chained-dollar series and its corresponding aggregate in tables that present chained-dollar values.
BEA releases three vintages of the current quarterly GDP estimate: “Advance” estimates are released near the end of the first month following the end of the quarter and are based on incomplete or subject to further revision by the source agency; “second” and “third” estimates are released near the end of the second and third months, respectively, and are based on more detailed and more comprehensive data as they become available.
The table below displays, without respect to sign, the average adjustments to quarterly percent increases in real GDP between different estimate vintages.
In late July, annual and complete updates are usually provided. Annual updates typically cover at least the previous five calendar years (and their accompanying quarters) and include newly available significant annual source data as well as some adjustments in techniques and definitions to improve the accounts. At around 5-year intervals, comprehensive (or benchmark) upgrades are performed, which include important periodic source data as well as major conceptual enhancements.
Because data on domestic profits and net interest of domestic industries are not available, advance current quarterly estimates of GDI and corporate profits are not given, unlike GDP. These data are not accessible until the third estimate for fourth quarter estimates.
The third estimate of GDP includes estimates of GDP by industry and gross output.
What do GDP figures imply?
- It indicates the total value of all commodities and services produced inside a country’s borders over a given time period.
- Economists can use GDP to evaluate if a country’s economy is expanding or contracting.
- GDP can be used by investors to make investment decisions; a weak economy means lower earnings and stock values.
What does a GDP of 5% indicate?
For example, if prices have risen by 5% since the base year, the deflator is 1.05. Real GDP is calculated by dividing nominal GDP by this deflator. Because inflation is always a positive figure, nominal GDP is usually higher than real GDP.
What does a high GDP figure mean?
Gross domestic product (GDP) has traditionally been used by economists to gauge economic success. If GDP is increasing, the economy is doing well and the country is progressing. On the other side, if GDP declines, the economy may be in jeopardy, and the country may be losing ground.
What is a good rate of GDP growth?
Economists frequently agree that the ideal rate of GDP growth is between 2% and 3%. 5 To maintain a natural rate of unemployment, growth must be at least 3%. However, you don’t want to grow too quickly.
Is GDP a good indicator of economic health?
GDP is a good indicator of an economy’s size, and the GDP growth rate is perhaps the best indicator of economic growth, while GDP per capita has a strong link to the trend in living standards over time.
What makes a low GDP so bad?
The entire cash worth of all products and services produced over a given time period is referred to as GDP. In a nutshell, it’s all that people and corporations generate, including worker salaries.
The Bureau of Economic Analysis, which is part of the Department of Commerce, calculates and releases GDP figures every quarter. The BEA frequently revises projections, either up or down, when new data becomes available throughout the course of the quarter. (I’ll go into more detail about this later.)
GDP is often measured in comparison to the prior quarter or year. For example, if the economy grew by 3% in the second quarter, that indicates the economy grew by 3% in the first quarter.
The computation of GDP can be done in one of two ways: by adding up what everyone made in a year, or by adding up what everyone spent in a year. Both measures should result in a total that is close to the same.
The income method is calculated by summing total employee remuneration, gross profits for incorporated and non-incorporated businesses, and taxes, minus any government subsidies.
Total consumption, investment, government spending, and net exports are added together in the expenditure method, which is more commonly employed by the BEA.
This may sound a little complicated, but nominal GDP does not account for inflation, but real GDP does. However, this distinction is critical since it explains why some GDP numbers are changed.
Nominal GDP calculates the value of output in a particular quarter or year based on current prices. However, inflation can raise the general level of prices, resulting in an increase in nominal GDP even if the volume of goods and services produced remains unchanged. However, the increase in prices will not be reflected in the nominal GDP estimates. This is when real GDP enters the picture.
The BEA will measure the value of goods and services adjusted for inflation over a quarter or yearlong period. This is GDP in real terms. “Real GDP” is commonly used to measure year-over-year GDP growth since it provides a more accurate picture of the economy.
When the economy is doing well, unemployment is usually low, and wages rise as firms seek more workers to fulfill the increased demand.
If the rate of GDP growth accelerates too quickly, the Federal Reserve may raise interest rates to slow inflationthe rise in the price of goods and services. This could result in higher interest rates on vehicle and housing loans. The cost of borrowing for expansion and hiring would also be on the rise for businesses.
If GDP slows or falls below a certain level, it might raise fears of a recession, which can result in layoffs, unemployment, and a drop in business revenues and consumer expenditure.
The GDP data can also be used to determine which economic sectors are expanding and which are contracting. It can also assist workers in obtaining training in expanding industries.
Investors monitor GDP growth to see if the economy is fast changing and alter their asset allocation accordingly. In most cases, a bad economy equals reduced profits for businesses, which means lower stock prices for some.
The GDP can assist people decide whether to invest in a mutual fund or stock that focuses on health care, which is expanding, versus a fund or stock that focuses on technology, which is slowing down, according to the GDP.
Investors can also examine GDP growth rates to determine where the best foreign investment possibilities are. The majority of investors choose to invest in companies that are based in fast-growing countries.
What constitutes a poor GDP growth rate?
The ideal GDP growth rate is determined by the country and the stage of its economic evolution. In China and India, a poverty rate of 2% to 3% is considered low. In the United States, however, this rate is regarded as normal. The United States aims for 2% real GDP growth to keep the economy in expansion for as long as possible. Because it accounts for inflation, real GDP growth is used to determine optimal rates. This is in contrast to nominal GDP growth, which accounts for current market price changes.
Whatever the pace of growth is, it must be balanced against unemployment and inflation. Strong GDP growth, a low to controllable unemployment rate, and low to manageable inflation constitute a healthy economy. An increase in GDP should, in theory, reduce unemployment by increasing demand for goods and services. An unemployment rate of less than 4%, on the other hand, indicates that firms are unable to hire enough workers. This could make it difficult for them to operate at full capacity, resulting in slower economic development and increased inflation. As a result, a delicate balance between these three parameters must be maintained.
What happens if the GDP is excessively high?
- Individual investors must develop a level of understanding of GDP and inflation that will aid their decision-making without overwhelming them with unneeded information.
- Most companies will not be able to expand their earnings (which is the key driver of stock performance) if overall economic activity is dropping or simply holding steady; nevertheless, too much GDP growth is also harmful.
- Inflation is caused by GDP growth over time, and if allowed unchecked, inflation can turn into hyperinflation.
- Most economists nowadays think that a moderate bit of inflation, around 1% to 2% per year, is more useful to the economy than harmful.
Is Y GDP real?
“Real GDP” is denoted by the letter Y. That doesn’t make sense to me for the following reasons: Assume that the US GDP (IOW, Y) equals $14 trillion in Year 1. This is the entire amount of money spent on newly generated goods and services in the actual world.