What Is GDP (Gross Domestic Product)?
What is GDP? Gross Domestic Product is the value of all the final goods and services an economy produces in a period. The US Bureau of Economic Analysis (BEA), which publishes the American figure, calls it a comprehensive measure of economic activity (BEA).
“Final” is the word doing the work. A loaf of bread counts. The flour the baker bought does not, because its value is already inside the loaf, and counting both would count the flour twice.
For a trader, GDP is an odd number. It is the broadest picture of an economy you can get, and by the time you see it, it is also one of the oldest.
Three estimates of one quarter
The BEA estimates each quarter three times, a month apart. The advance estimate comes about a month after the quarter ends. The second and third each add source data that was not available the month before (BEA learning centre).
Take the second quarter of 2022, April to June. The advance estimate came at 8:30 a.m. Eastern Time on 28 July and showed real GDP falling at an annual rate of 0.9% (BEA, 28 July 2022). The second, on 25 August, put the fall at 0.6%, and the third, on 29 September, kept it there (BEA, 29 September 2022).
The third estimate is not the last word either. The BEA revises past quarters again in its annual updates, and over the years the figure travels further than it did in the first two months. Take every quarter from 1992 to 2023 with an advance estimate, 127 in all, and set the advance figure beside the one in the BEA’s data as of September 2026, as the Philadelphia Fed’s real-time data set keeps them (Philadelphia Fed, first, second, third and most recent).
In the median quarter the two are 1.1 percentage points apart at an annual rate. By the third estimate, the median gap from the advance figure was only 0.4 of a point. In 68 of the 127 quarters the gap is more than a point. In 7 the figure now points the other way: growth where the advance estimate showed a fall, or the reverse.
By the advance estimate you have already seen three months of PMI surveys, payrolls and retail sales from that quarter. The forecast has soaked most of it up, so the surprise on the day is only what that earlier data did not already show.
The calendar on this site follows the third estimate. Its next date is on When is the next US GDP third estimate? and the forecast and recent results against it are on US GDP Growth Rate (Third Estimate).
The US headline is an annual rate
The BEA reports quarterly growth at an annual rate: the pace the economy would grow at if the quarter’s growth went on for a full year. Its figures are also seasonally adjusted, so winter weather and holidays do not show up as growth or decline.
Say the economy grows 0.5% in a quarter. Kept up for four quarters, that is about 2%, so the headline says 2%. It works the same way down: that fall of 0.6% at an annual rate in the second quarter of 2022 was a fall of about 0.15% in the quarter itself.
So before you compare the US with another country, check whether both figures are annualised. If one is not, you can end up thinking the US grows four times as fast.
The figure everyone quotes is real GDP, adjusted to remove inflation. Growth in real GDP means more was produced, not just that prices went up.
Two negative quarters is not the definition of a recession
You will often read that two quarters in a row of falling real GDP make a recession. That is a rule of thumb.
In the US, the National Bureau of Economic Research (NBER) dates recessions. It looks for a significant decline in activity, spread across the economy and lasting more than a few months, and it weighs how deep, how widespread and how long the decline is (NBER).
That same second quarter of 2022 shows the difference. Real GDP had already fallen at an annual rate of 1.6% in the first quarter (BEA, 28 July 2022), so the advance estimate made it two negative quarters in a row. Yet the NBER dated no recession in 2022: the most recent on its list runs from a peak in February 2020 to a trough in April 2020.
The second of those quarters is one of the 7 that changed direction. In the BEA’s figures today, the second quarter of 2022 grew at an annual rate of 0.6% (BEA via FRED). Of the two negative quarters, only the first is still negative.
How forex reads GDP
As with every release, the market trades the gap between the result and the forecast. Growth above the forecast makes a central bank more willing to keep rates high, which tends to support the currency. Growth below it points the other way.
The revisions count too. A quarter that comes in at the forecast, with the quarter before it revised down, leaves the economy weaker than you thought that morning.
The other major economies publish their own: Euro Area GDP Growth Rate, UK GDP Growth Rate, Japan GDP Growth Rate, Canada GDP Growth Rate and Australia GDP Growth Rate.