Forex Fundamentals
Forex Economic Indicators

What Is GDP (Gross Domestic Product)?

By Rutger Lokin · Updated

GDP, short for Gross Domestic Product, is the value of the final goods and services an economy produces, without counting twice the goods and services used up to make them. For the US Bureau of Economic Analysis (BEA), which publishes it, changes in GDP are the best-known gauge of the nation’s overall economic health (BEA).

The BEA publishes each estimate at 8:30 a.m. Eastern Time; every date is on its release schedule. The date and time of the next third estimate are on When is the next US GDP third estimate? The forecast and the recent results against it are on US GDP Growth Rate (Third Estimate).

How the US figure is published

The BEA estimates each quarter three times, a month apart (BEA learning centre):

  • the advance estimate, about a month after the quarter ends;
  • the second estimate, with source data that was not available the first time;
  • the third estimate, with more of that data again.

The figures are seasonally adjusted. Quarterly growth is given at an annual rate: the pace the economy would grow at if the quarter’s growth went on for a full year. Check whether a figure is annualised before comparing it with another country’s.

Markets watch real GDP, which is adjusted to remove the effects of inflation. Growth in real GDP means more output, not just higher prices.

Recession: a rule of thumb, not a definition

Two quarters in a row of falling real GDP is often called a recession. That is a rule of thumb.

In the US, the National Bureau of Economic Research (NBER) dates recessions. It defines one as a significant decline in economic activity that is spread across the economy and lasts more than a few months (NBER). It weighs how deep, how widespread and how long the decline is, so its call can differ from the two-quarter shortcut.

How forex reads GDP

GDP describes a quarter that is already over. By release day, monthly data such as the PMI have usually shaped the forecast.

  • Growth above the forecast makes a central bank more willing to keep rates high. That tends to support the currency.
  • Growth below the forecast points the other way.

The reaction comes from the surprise against the forecast and from revisions to earlier quarters.

The other major economies publish their own: Euro Area GDP Growth Rate, UK GDP Growth Rate, Japan GDP Growth Rate, Canada GDP Growth Rate and Australia GDP Growth Rate.