Gross Domestic Product (GDP)
The total monetary value of all goods and services produced within a country in a given period — the headline measure of economic size and growth.
Formula
GDP = C + I + G + (X − M)
Gross Domestic Product (GDP) measures the total output of an economy. It is released quarterly and is the broadest scorecard of economic health. Growth above trend signals expansion; two consecutive quarters of contraction is the classic definition of a recession.
GDP surprises move markets by resetting rate-cut or rate-hike expectations. Strong GDP can delay central bank easing; weak GDP accelerates it. Traders also decompose GDP into its components — consumption, investment, government spending, net exports — to identify where the strength or weakness is concentrated.
Related Terms
Business Cycle
The recurring sequence of economic expansion, peak, contraction, and trough that drives sector rotation, earnings cycles, and asset class returns.
IntermediateConsumer Confidence
A survey-based measure of households' optimism about the economy — a leading indicator of consumer spending, which drives ~70% of U.S. GDP.
BeginnerFiscal Policy
Government spending and taxation decisions that expand or contract the economy, independent of the central bank's monetary levers.
BeginnerInflation
The rate at which the general price level of goods and services rises, eroding purchasing power over time.
BeginnerInterest Rate
The cost of borrowing money, set or influenced by central banks — the single most powerful lever in macroeconomics.
BeginnerLagging Indicator
An economic measure that confirms a trend after it has already begun — useful for validating cycle phases but not for anticipating them.
IntermediateLeading Indicator
An economic data point that tends to move before the broader economy — useful for anticipating turning points before they show up in lagging hard data.
IntermediatePurchasing Managers Index (PMI)
A monthly survey of business activity across manufacturing and services — a leading indicator that moves markets before hard data arrives.
IntermediateRecession
A significant economic contraction — commonly defined as two consecutive quarters of negative GDP growth — that hits corporate earnings and risk assets hard.
BeginnerRetail Sales
Monthly measure of consumer spending at the register — a direct read on whether households are putting their money to work.
BeginnerTrade Balance
The difference between a country's exports and imports — a surplus means more exports; a deficit means more imports, affecting GDP and currency.
IntermediateUnemployment Rate
The share of the labor force actively seeking work but unable to find it — a key input to central bank employment mandates.
Beginner