What Drives GDP Growth?

GDP growth, boy a thing that sometimes we don’t hear much about and then other times we hear a lot about. Oftentimes, you know GDP is a reflection or a measure used when we talk about recession, right? Is our country growing or contracting and what is that measure? Well GDP, gross domestic product. Typically measured quarterly, a specific period of time and then it’s measured look back at times, typically and seen that. There’s estimates that come out by various agencies and stuff like that over time, but then ultimately the government comes out with its quarterly measure. And then it’s adjusted over time and then they’ll have their final at some point. But what is it? What makes up the GDP then affectively? Well basically it’s consumer spending, plus business investments, plus government spending, plus your net exports. Unless you have an export deficit, right? Then you need to subtract that. So here in the U.S. when you look at consumer business in government, you know those are going to total some factor. And then we’re either going to have a trade surplus or deficit and then you’ll take or subtract that. So if you have a positive GDP growth, that means, you know the country has grown by that amount, right? A negative, that means it’s contracted, it shrunk by that. That could be a factor of many different things, right? If anyone of those three spending sort of things were less, that’s a factor or if the trade export/import thing was a surplus or a deficit would have a role on that, right? So this measure here is a big piece of that sort of thing. People will argue against that, that there’s different advantages and disadvantages to this or maybe it’s outdated or it’s not factoring this or that. But for right now, that’s the measure that we’re using, right? And when you’re looking at investments as a retirement planning and all this sort of stuff, why is that important to you? Well obviously when you look at investments, you know you’re a fractional share holder or a fractional owner, right in maybe a company if you’re owning the stock, right? Well you want that company to be doing well. And for most companies, it’s easier to do well when the country is growing, right, when it’s expanding and people are spending money. And you know we’re trading with other countries and all this sort of stuff is happening. So when we see these times of expansion, you know that’s typically, not always, but typically good for most investors. So that’s usually we want to see positive GDP growth in some factor. And then there’s different things that could go into that place. So this is just one measure that we look at when we’re planning and we’re looking at investments and all those things. And just once again, one of those things we like to talk about and bring education to you so you can plan to retire well.