How GDP is measured: the GDP report, step by step

Gross domestic product, or GDP, is the value of the final goods and services produced in the United States. The Bureau of Economic Analysis (BEA), part of the Commerce Department, publishes it quarterly and annually. The GDP report is the broadest single gauge of whether the economy is growing, and it is closely watched by policymakers, businesses and investors.

In brief

• GDP counts final goods and services, not every transaction, to avoid counting the same output twice.
• The number most people quote is the percentage change in real, inflation-adjusted GDP.
• BEA estimates each quarter three times: advance, second and third.
• GDP is the headline piece of the National Income and Product Accounts (NIPA).

What GDP counts

BEA describes GDP as the value of final goods and services produced in the United States. “Final” matters. A car counts when it is sold to its end user, and the steel and glass that went into it are not added separately, because their value is already inside the car’s price. Counting both would measure the same output more than once.

“Produced in the United States” is also a boundary. GDP measures output within the country’s borders, regardless of who owns the producer. It differs from measures based on the nationality of the owners.

GDP is the signature product of BEA’s National Income and Product Accounts, which measure the value and makeup of the nation’s output, the types of income generated and how that income is used. The same accounts supply the broader context around the headline: how output splits among consumers, businesses, government and the rest of the world.

The main components

BEA’s learning center organizes the pieces of GDP around the major buyers of output. In the standard expenditure view:

• Consumer spending. Household purchases of goods and services. This is the largest component of the US economy.
• Investment. Business spending on structures, equipment and intellectual property, residential construction, and changes in business inventories.
• Government. Federal, state and local purchases of goods and services. Transfer payments such as Social Security are not counted as government spending in GDP because they do not buy current production.
• Net exports. Exports minus imports. Imports are subtracted because they are included in the spending categories above but were not produced domestically.

Adding the four gives GDP. Looking at which component moved is often more informative than the total. A quarter in which growth comes from inventory building tells a different story from one driven by household spending.

Real versus nominal

BEA draws a clear line between two ways of expressing GDP.

• Current-dollar, or nominal, GDP is based on market prices during the period measured. It rises when prices rise even if output does not.
• Real, or chained, GDP removes the effects of inflation so that different periods can be compared.

The figure the news usually cites is the rate of change in real GDP from the previous quarter or year. When coverage says the economy grew, it almost always refers to this real measure. Nominal GDP is useful when comparing output with something that is itself measured in current dollars, such as debt.

Annual rates and seasonal adjustment

Quarterly GDP is reported at annual rates for ease of comparison, unless otherwise specified. In other words, the quarterly change is expressed as if the same pace continued for a year. As an arithmetic illustration, growth of 1 percent in a single quarter, compounded over four quarters, is about 4.1 percent at an annual rate. The numbers here are invented to show the conversion and are not data.

BEA also seasonally adjusts GDP to remove yearly patterns such as winter weather, holidays and factory production schedules. It releases unadjusted data as well. Seasonal adjustment lets a quarter be compared with the one before it, though the adjusted and unadjusted series are not interchangeable.

Why there are three estimates

BEA estimates the nation’s GDP for each year and each quarter, but new GDP statistics appear every month. The reason is that BEA estimates each quarter three times.

1. Advance estimate. It comes about a month after the quarter ends and is an early look based on the best information available at that time.
2. Second estimate. It incorporates additional source data that were not available the month before.
3. Third estimate. It adds still more complete data.

The BEA release schedule lists these as separate dated events, together with related products such as corporate profits and state GDP. Readers should treat the advance figure as provisional and compare it with the later two. Estimates are also revised beyond the third estimate as new source data and updated methods are incorporated, which is why BEA publishes material explaining why old GDP numbers change.

Where the data come from

GDP is not measured by a single survey. BEA assembles it from source data produced across the government and elsewhere, including Census Bureau surveys of retail sales, construction, trade and manufacturing, tax and administrative records and Bureau of Labor Statistics data. This is why the advance estimate, issued before many of those sources are complete, carries more uncertainty than the third.

The Census Bureau’s economic indicators described in our economic calendar guide are among the monthly series that inform the quarterly accounts. The methodology, definitions and source data used to build the accounts are documented in BEA’s NIPA Handbook.

Related BEA products

BEA publishes more than the national headline.

• State GDP, estimated quarterly and annually for each state and the District of Columbia.
• County GDP, covering 3,113 counties and county equivalents with 34 industries. BEA’s first official county GDP statistics were produced in December 2019.
• Industry GDP, produced quarterly and annually, including value added, gross output, compensation of employees, gross operating surplus and taxes.
• Territory GDP, released annually for American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico and the US Virgin Islands.
• Historical tables. Percent-change GDP tables go back to 1930 and dollar-amount tables to 1929.

These products answer questions the national figure cannot, such as which state economies are growing fastest or which industries are expanding.

GDP compared with other measures

GDP is one view of the economy, and BEA’s accounts are built so that several views fit together. The National Income and Product Accounts measure the value and makeup of output, the types of income generated and how that income is used. That means the production side (what was made), the spending side (who bought it) and the income side (who earned money making it) describe the same economy from different angles. Analysts compare them to check each other, and differences between the spending-based and income-based pictures are one reason early estimates get revised.

Two cautions follow. First, GDP is not the same as the stock market, which prices expectations about company profits, or as personal income, which BEA reports separately in its monthly Personal Income and Outlays release. Second, GDP is a flow measured over a period, not a stock of wealth. It says how much was produced in a quarter or a year, not how much the country owns.

How to read the GDP report

1. Identify the estimate. Is it advance, second or third? That tells you how much to expect it to change.
2. Find the real growth rate. Check that you are looking at the inflation-adjusted, annualized quarterly change.
3. Look at contributions. BEA’s tables show how much each component added to or subtracted from growth.
4. Check the revisions. Compare the new estimate for the quarter with the prior estimate, and note any changes to earlier quarters.
5. Watch the price measures. The report includes price indexes alongside output, which show how much of nominal growth is inflation.
6. Keep the limits in mind. GDP measures market production. It does not capture unpaid household work, nor does it measure well-being, income distribution or environmental cost.

Common misconceptions

GDP is the total of all spending in the economy. It counts spending on final goods and services produced domestically. Intermediate purchases and used goods are not included, and imports are netted out.

A high GDP means high living standards. It is a measure of production. BEA itself describes it as a barometer, not a full account of how people are doing.

Negative growth for two quarters is an official recession. In the United States, recession dating is done by the National Bureau of Economic Research, not by a fixed rule applied to BEA data.

The advance estimate is the real GDP. It is an early estimate that BEA improves with later releases.

Nominal and real growth are the same. The difference between them is inflation, and it can be large.

FAQ

Who publishes GDP in the United States?

The Bureau of Economic Analysis, an agency of the Department of Commerce, publishes GDP as part of the National Income and Product Accounts.

How often is GDP released?

Quarterly, with three estimates per quarter, plus annual figures. Monthly releases appear because the advance, second and third estimates for each quarter are spread over successive months.

What is the difference between real and nominal GDP?

Nominal GDP uses current market prices. Real GDP adjusts for inflation so that periods can be compared on a like-for-like basis.

Why is GDP reported at an annual rate?

It puts each quarter’s change on a yearly scale so that quarters can be compared with annual growth figures.

Does GDP include imports?

Imports are included in the spending categories but subtracted as part of net exports, so GDP reflects only domestic production.

Where can I find the release date?

On the BEA release schedule, which is available as a table, a printable page, an ICS calendar feed and a JSON file.