The ABC's of the GDP

The granddaddy of all economic statistics will be released at 8:30 a.m. tomorrow, and the numbers will show whether or not the U.S. economy has started to claw out of its most dismal slump since the Great Depression.

Gross Domestic Product, in all its intricacies and implications, isn’t something you can assimilate overnight. But since it’s pretty much all of the statistics we’ve already discussed – and more – wrapped into one, it behooves any business reporter to bone up a bit.

Considered the key measure of any country’s economic health, the GDP basically is the sum of all goods and services produced here. It’s considered a lagging indicator, meaning it’s a review of how things were in the previous quarter, from personal income to goods exported overseas.

If quarterly GDP growth (or contraction) deviates significantly from predictions, markets globally will gyrate. According to Reuters, analysts expect the Q2 advance report to show further contraction in the U.S. economy -- the first time since 1947 that records show four consecutive negative quarters – but the pace of contraction is expected to ease.
Start at the Commerce Department’s Bureau of Economic Analysis, which produces the GDP reports.

Click on the GDP channel and you’ll find an e-mail sign-up, educational information about methodology, and other helpful info. Note that the GDP figures for any given quarter are released three times – the advance, preliminary and final reports. The advance is our first peek and will be refined twice more until we get the final verdict on the second quarter. If you’ve never done so before, you might want to read the releases for previous quarters to familiarize yourself with the format.

The spot news in the GDP story will be whether or not it signals an end to the recession. In that regard, you can plan on doing a local economy story highlighting the hardest-hit sectors in your area. If your readers have lost manufacturing jobs or tourism revenue or orders for new airplanes, talk to regional analysts, academics and economists about how long an upswing might take to revive or replace those losses at the local level – and fold in macro view using national statistics.

GDP results tend to move markets; if they buoy or dampen the mini-rally underway, keep an eye Friday on stocks of local interest, especially large employers whose shares are likely lurking in your readers’ retirement accounts.

Also, be sure to root around on the BEA site; you’ll find GDP stats for states and metro areas as well as the U.S.-wide figure. On the downside, the data is a couple of years old, but the interactive maps and tables may provide a springboard for stories as well as charts and graphics.

As an aside, note that the BEA also tracks personal income and spending and issues monthly reports. The June numbers will be released August 4 so you might want to give that channel a glance too, while you’re on the site.

And keep in mind, as Mark Twain supposedly quoted, “there are three kinds of lies: Lies, damned lies and statistics.” Not everyone agrees that the GDP figure is a true reflection of our economy. I doubt the measure is going to be scrapped any time soon, but critiques help you put it in perspective; here’s a link to a readable Associated Press piece from last year explaining some analysts’ qualms.

Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.