GDP is one of the most closely watched economic indicators, and a rising number generally indicates that a country’s economy is growing. But calculating the measure can be complicated. For example, since GDP data are collected at current prices (also called nominal), any increase must be adjusted for inflation in order to compare growth over time. And because GDP measures market activity only, it does not reflect the well-being of citizens — or even the environmental cost of increased production, for that matter.
Also, GDP excludes activities that take place outside of markets, such as household production or bartering and unpaid work such as volunteerism or gardening. And it doesn’t always account for quality improvements or new products that make older items obsolete. So, for example, a person’s increased ability to buy antibiotics and cell phones because of cheaper and more efficient technologies isn’t reflected in GDP, even though those purchases may be good for the country’s citizenry.
The data used to calculate GDP come from many sources and are compiled by government agencies, such as the Bureau of Economic Analysis at the U.S. Department of Commerce, and by businesses, trade associations and others. The data are then published in the Federal Reserve Bank of St. Louis’s FRED database and are available for anyone to use. The components of GDP are private consumption, investment, government spending and net exports (or exports minus imports). A rising number for any of these categories generally indicates that a country’s economy is growing.
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