US Real GDP Today — Current Output & Growth Trend

What is Real GDP?

Real Gross Domestic Product (GDPC1) is the inflation-adjusted total market value of all final goods and services produced within the United States in a given quarter, measured in chained 2017 dollars. Published quarterly by the Bureau of Economic Analysis as part of the National Income and Product Accounts, real GDP is the broadest and most authoritative measure of US economic output. The headline number is reported at a seasonally adjusted annual rate, meaning the quarterly change is multiplied by four to express what the full-year growth rate would be if that quarter's pace continued. Real GDP differs from nominal GDP by stripping out price changes, isolating the volume of production. Two consecutive quarters of declining real GDP form the colloquial — though not official — definition of a recession; the official recession arbiter, the NBER Business Cycle Dating Committee, considers a broader set of indicators including employment, real personal income, and industrial production. Real GDP is also the denominator in many financial ratios that policymakers track, including the debt-to-GDP ratio and the federal deficit as a share of GDP.

Why Real GDP matters for stocks

Equity earnings are ultimately a share of nominal GDP, so the real-GDP growth rate plus inflation sets the ceiling on corporate revenue growth. Above-trend GDP growth supports cyclicals — industrials, materials, consumer discretionary, financials — because demand and credit growth are strong. Below-trend or contracting GDP favors defensives and quality balance sheets. The composition of GDP growth also matters: consumption-driven growth supports retail and services; investment-driven growth supports capital goods makers; net-export-driven growth favors multinational manufacturers. Markets often move ahead of GDP, since the data is released with a lag and is heavily revised.

Other US macro indicators