U.S. GDP

Description of some new U.S. Gross Domestic Product (GDP) charts and a brief discussion of GDP.

Gross Domestic Product, or GDP, is one of the most widely quoted economic statistics. It is a measure of the market value of all final goods and services produced by a nation in some time period. GDP is often thought of as the "size" of the economy. The following chart shows annual GDP for the U.S. over time:

For the previous chart, the GDP units are billions of U.S. dollars. However, due to inflation, the value of a dollar changes over time. Since the previous chart is not adjusted for inflation, it doesn't give an accurate view of the growth in the U.S. economy over time. For this reason, the following measure of GDP inflation has been created:

A dollar of GDP at an inflation index of 100 is worth half as much as a dollar of GDP at an inflation index of 50. Therefore, the Real GDP is inflation adjusted into constant value dollar units by dividing GDP by the (GDP inflation index / 100). The result gives a more accurate view of economic growth over time and is referred to as Real GDP:

Since the chart above contains yearly GDP data, it only has one data point each year and the last data point can be pretty stale. Thus, yearly GDP data is not very useful for quickly identifying the current economic growth rate. For this reason, quarterly GDP data is collected as well:

One downside of the quarterly GDP data is that there are some pretty noticeable regular seasonal swings in GDP. These seasonal swings can obscure non-seasonal changes in economic growth. For this reason, the following seasonality factors are calculated:

Note that the lowest seasonality factors are all for Q1 and the highest seasonality factors are all for Q4. This means that every year Q1 tends to have the smallest GDP and Q4 tends to have the largest. Dividing these quarters by their seasonality factors smooths out repeating seasonal variations as demonstrated in the next chart.

In an attempt to make quarterly numbers more comparable to yearly numbers, seasonally adjusted numbers can be converted to an annual rate - that is, multiplied by 4. The combination of seasonal adjustment and converting to an annual rate produces values referred to as being at a Seasonally Adjusted Annual Rate (SAAR). The following chart shows quarterly U.S. Real GDP at a seasonally adjusted annual rate:

The previous GDP charts focused on GDP values over time which give information about the size of the economy at various points in time. However, the rate of economic growth is related to rate at which GDP changes. The next chart takes the data from the previous chart and graphs the year-over-year (YOY) percent change -- that is, the percent change of each of the quarter from the quarter one year earlier.

The previous chart gives, each quarter, an estimate of economic growth over the previous four quarters. The next chart gives an estimate of what the economic growth would be if the current quarter's growth rate persisted for an entire year. See chart details for a description of the calculation.

Since quarterly data is not available as far back in time as yearly data, the next three charts use quarterly data when available and yearly data otherwise to create the longest history with the best available granularity for the GDP, Real GDP, and Real GDP Year-Over-Year.

GDP is often used as a measure of economic growth and health of a nation. Unfortunately, using GDP this way can be very misleading for a number of reasons. One reason GDP can be misleading is that it is more of a measurement of income and expenses. There is no consideration in the GDP for changes in assets and liabilities. It is hard to get a good view of the health of any financial entity without considering assets and liabilities. Nations are no exception.