Gross Domestic Product (GDP) definition

  • Of all the market indicators, GDP is probably the most significant indicator of a country’s economic health, showing its rate of growth. Monthly statistics are published showing economic output, but GDP is measured annually, showing the total market value of all the goods and services that the country has produced over the last year. It measures the trade balance, (exports minus imports), private and governmental purchases, and any investments.

    Three versions of the GDP report are released, an advance report, a preliminary report the following month, and the final report another month later. Any significant discrepancies in those numbers can impact the movement of markets.

    The report presents the results in two separate formats. One is the Current Dollar GDP, which shows the market value of goods and services produced over the year, according to today’s rates. The other is the Constant Dollar GDP, or Real GDP, which calculates the quantity of goods and services that make up the year’s economic output. It converts the results into a standard permanent dollar value, which allows for comparisons between years, without having to take factors such as inflation into account.