Glossary
Real GDP growth
The inflation-adjusted percentage change in GDP, reported quarterly in the US at a seasonally adjusted annual rate.
On this page
Real GDP growth is the percentage change in a country's output of goods and services after removing the effect of price changes. It is the headline measure of whether an economy is expanding or shrinking, and it shapes earnings expectations, central-bank decisions and talk of recession. In the US, the Bureau of Economic Analysis (BEA) publishes it each quarter as part of the gross domestic product report.
How it works
The BEA's headline number is the quarter-over-quarter change in real GDP, expressed as a seasonally adjusted annual rate (SAAR): the pace the economy would grow at if that quarter's rate continued for a full year.
Revisions and pitfalls
Each quarter's number appears three times: an advance estimate about a month after the quarter ends, then a second and third estimate in the following months, with annual and comprehensive revisions later. Revisions of a percentage point or more are not unusual, so markets react to the surprise against expectations and treat early readings with caution.
Other points to remember:
- Real versus nominal. Nominal GDP includes inflation; real GDP removes it with a price index.
- Composition. Swings in inventories or net exports can move the headline without reflecting underlying demand; many economists also watch final sales to private domestic purchasers.
- Recessions are not defined by two negative quarters in the US; the NBER's committee dates them using a broader set of indicators.