Definition and Importance of GDP (Gross Domestic Product)
Posted by mfalvey on December 22, 2009 · Leave a Comment
Gross Domestic Product (GDP)
GDP is a comprehensive scorecard of the country’s economic health. It represents the total value of the country’s production and consists of purchases of domestically produced goods and services by individuals, businesses, foreigners, and the government.
- It is released quarterly, with revisions, by the Bureau of Economic Analysis, U.S. Dept of Commerce.
- Because the GDP is the all-inclusive measure of economic activity, it not only paints an image of the overall economy, but it also provides investors with insight about important trends within the big picture.
- Components of the GDP, such as consumer spending, business and residential investment, and price indexes can alert investors to opportunities as well as provide guidance in managing a portfolio.
- Typically, or generally speaking, stock investors like to see robust economic growth because it translates into higher corporate profits. Bond investors are very sensitive to inflation and strong economic growth could potentially lead to inflation.
Ask your advisor about the specific implications for your investments or send me an email at mfalvey@richinvest.com