What GDP means

GDP measures the total value of goods and services an economy produces. Here is how it is measured, how it is reported and why markets watch it.

GDP stands for gross domestic product. It is the total value of all the goods and services produced in a country over a period of time. It is the most common way to measure the size of an economy and whether it is growing or shrinking.

What counts

GDP counts final goods and services. A final good is something sold to its end user, such as a car bought by a household. The steel and tires that went into the car are not counted separately, because their value is already part of the car's price. This avoids counting the same thing twice.

GDP covers production inside a country's borders. It includes work done by foreign-owned companies operating there.

The four main parts

Economists often break GDP into four parts, based on who is spending:

1. Consumer spending. What households spend on goods and services, from groceries to haircuts. It is the largest part in both the US and Canada.
2. Business investment. What companies spend on buildings, equipment and software. New home building is usually counted here too.
3. Government spending. What governments spend on goods, services and projects. Payments such as pensions are not counted here, because they move money around rather than buy something.
4. Net exports. Exports minus imports. Selling goods abroad adds to GDP. Buying goods from abroad is subtracted.

Nominal vs real GDP

Nominal GDP uses today's prices. It can rise just because prices went up.

Real GDP removes the effect of price changes. It shows whether the economy actually produced more. When the news reports GDP growth, it almost always means real GDP.

How it is reported

GDP is reported every three months, for each quarter of the year.

In the US, the Bureau of Economic Analysis publishes GDP. The headline growth rate is usually shown as an annualized rate. That means the quarter's growth is converted into what it would be if it continued for a full year. A quarter with growth of about 0.5% would be reported as about 2% annualized.

In Canada, Statistics Canada publishes GDP. It reports quarterly figures and also releases a monthly GDP estimate by industry. Canadian news often quotes both the quarterly change and the annualized rate, so check which one is being used.

Estimates get revised

The first GDP figure for a quarter is an early estimate. It is based on incomplete data. Later releases update it as more information comes in.

Revisions can be large enough to change the story. A quarter first reported as weak can later look stronger, or the other way around.

GDP and recessions

A shrinking economy means GDP is falling. A common rule of thumb says two quarters in a row of falling real GDP is a recession.

That rule is not the official definition in either country. In the US, a committee at the National Bureau of Economic Research decides when recessions start and end. It looks at many measures, including jobs and income. Canada has no single official body that does the same, though some groups track recession dates. See what a recession is.

GDP per person

Total GDP grows when the population grows, even if each person is not better off. GDP per capita divides GDP by the population. It gives a better sense of average living standards. It still does not show how income is shared across people.

Why markets watch GDP

GDP gives a broad picture of the economy. Strong growth tends to support company sales and profits. Weak growth can point to pressure on profits.

GDP also matters to central banks. The Federal Reserve and the Bank of Canada look at growth when setting interest rates. Strong growth with high inflation can lead to higher rates. Weak growth can lead to cuts.

Markets often react more to how GDP compares with forecasts than to the number itself. A figure that matches expectations may barely move prices.

What GDP leaves out

GDP is useful, but it has limits.

• It does not count unpaid work, such as caring for family at home.
• It does not measure well-being, health or the environment.
• It looks backward. By the time a quarter is reported, it is already over.

That is why economists use GDP alongside other reports, such as monthly jobs data.

The short version

• GDP is the total value of goods and services an economy produces.
• Real GDP removes the effect of rising prices.
• The US usually reports GDP growth as an annualized rate.
• Early GDP figures are estimates and are often revised.
• Two falling quarters is a rule of thumb for recession, not the official definition.

This is general information, not investment advice.

Updated 9 October 2026