GDP is an important statistic that measures the overall economic output of a country. It is used by economists and policymakers to evaluate the health of an economy, predict future growth, and determine appropriate economic policies. The advance release of GDP data is often heavily followed by investors, and significant changes in the number can have a big impact on market movements.
GDP includes all goods and services produced within a country for both final consumption and investment purposes. It does not include any intermediate goods such as steel or flour that are used up in the production process of final goods like cars or bread. It also excludes any services that are performed for non-consumption reasons such as construction work or unpaid volunteer activities.
The measurement of GDP is done on a quarterly or annual basis depending on the country. It can be reported in either nominal or real (inflation-adjusted) terms. GDP is normally measured in a country’s local currency but can be converted to other currencies using either market exchange rates or purchasing power parity (PPP) exchange rates. Nominal GDP can be compared between countries using the current market exchange rate while real GDP allows for comparisons over time taking into account differences in inflation.
Governments and central banks closely monitor GDP growth to see if the economy is expanding, stagnating, or shrinking. They use this information to make decisions about public spending, taxes, and interest rates.