GDP is the sum of a country’s private consumption, investment and government spending plus net exports. BEA releases three estimates of GDP for each quarter: The advance estimate is the first available and usually comes about a month after the end of the quarter; the second and third estimates incorporate more complete source data that weren’t available the previous month, increasing accuracy.
Using GDP, policymakers, investors and consumers can compare the overall health of the economy over time. If a country’s GDP is growing, that suggests that people and businesses are producing more goods and services than before. Conversely, if GDP is shrinking, it implies that the country’s economy is stalling or becoming less productive.
To calculate GDP, BEA takes the market value of all final goods and services produced within a country during a certain period and then divides that number by the country’s total population. The resulting number is the gross domestic product (GDP) per capita.
A caveat: Because GDP is measured in current prices, when comparing GDP between two periods, it must be adjusted for inflation. This makes it more meaningful to look at changes in real (i.e., “nominal”) GDP.
However, as BEA’s economists explain in this article, GDP is not the be-all and end-all of measuring an economy’s health. For one thing, GDP doesn’t tell us how evenly income is distributed among a country’s citizens; growth could mean that the richest 20% of the population gets even richer while everyone else’s standard of living remains flat or even declines.