What is Gross Domestic Product (GDP)
Gross Domestic Product is the measurement of a nation’s income and expenditure for the country’s economy. It is measured by taking all total costs for all goods and services the country produced by the country in a stated period.
Usually, a country’s GDP is determined yearly. However, it's not uncommon for it to be measured on a quarterly period like it is in the US, which releases a GDP report four times a year. Because the GDP measures all aspects of a countries income and expenditures, it is used as a broad indicator of the nation’s total economic health.
The GDP’s Impact on the market and what to look for as a futures trader
While the GDP report only comes quarterly or yearly, GDP data is usually released monthly in some form. For example, in the United States, the Bureau of Analysis (BEA) releases a detailed report of GDP data a month after the quarter ends and a concluding release three months afterward. The data in these let us obtain information and insights about different areas of the nation’s economy.
Despite this, the initial impact a GDP report has is usually tame since most of the data has already been released over time. An exception occurs however when the actual numbers are significantly different from the expectation.
If the GDP for a country is strong we can assume that more products are being bought, companies might hire more and have more money to spend. Overall, futures traders should look at the Gross Domestic Product report as a possible long-term prediction that will affect all areas of the economy, instead of an economic event with significant immediate impact.
It's important to note that GDP by itself is not an indicator of the nations well being or its citizen's economic health. A nation could show major GDP growth while at the same time its citizens could have an increasing income gap. Instead, look at Gross Domestic Product as an indicator for production.