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HOME > ECONOGUIDE > U.S. REAL GDP
Friday, November 20

Real GDP is a quarterly figure, but estimates are released late-month over three successive months, immediately following the relevant quarter. Real GDP is a summary measure of economic performance, as it represents the total amount of goods and services produced in the U.S. The advance estimate is released initially followed by two revisions—the preliminary and the final. There are four broad components to real GDP, consumption (68%), investment (18%), government spending (18%) and net exports (4%, due to trade deficit).

Real GDP is calculated using a chain-weighted price system, which produces a more accurate comparison of economic growth over long periods. One can also separate increases in volume from increases in prices.

Real GDP does not directly help forecast other data as it represents economic conditions up to three months in the past. But, it does have a significant impact in the analysis of the Federal Reserve as real GDP provides the most comprehensive indicator on the state of the business cycle.

The headline figure is reported as a percent change at an annual rate and is the primary signal on the pace of economic growth. The advance estimate typically has the greatest impact on markets as this presents new information. If the economy has recently been growing quickly, a rate of growth greater than expected may indicate that the economy is overheating and that inflation may rise, or if growth has been negative or very low, it may indicate that the economy is rebounding.

Also important is final sales to domestic purchasers, or GDP less the change in private inventories plus imports less exports, which is an indicator of the health of spending in the economy. A decrease in final sales to domestic purchasers may be a symptom of declining wealth and/or a weaker job market.
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