The Importance of GDP to Economists and Investors:
Gross Domestic Product (GDP) is one of the primary indicators used to gauge the health of a country’s economy. To put it simply, GDP measures the overall size of the economy. It equals the total dollar value of all goods and services produced over a specific period of time. The current United States GDP exceeds $18 trillion per quarter.
Since GDP represents economic production and growth, a significant change in GDP can have a significant impact on the stock market. A healthy economy is characterized by low unemployment, high wages, and increased revenues for companies. An unhealthy economy, however, is characterized by high unemployment, low wages, and declining revenues. Investors typically grow concerned about negative GDP growth – and rightfully so. Stagnant or decreasing earnings throughout Corporate America can translate to a drop in stock prices across the board.