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GDP Growth

In short

Percentage change in total economic output — the broadest measure of economic health

GDP growth measures how much the economy grew (or shrank). Think of it as the economy's report card. Above 2-3% is healthy. Two consecutive negative quarters = recession. Recessions hurt stocks but eventually lead to recoveries.

GDP (Gross Domestic Product) growth rate measures the percentage change in total economic output. US quarterly GDP is reported by the BEA. Sustained GDP above 2.5% supports earnings growth and equity markets. Below 0% for two quarters is the informal definition of recession.

Formula

GDP Growth = (GDP_current - GDP_prior) ÷ GDP_prior × 100

Thresholds

< -2
Severe recession
-2 to 0
Mild recession or contraction
0-2
Slow growth
2-4
Healthy expansion
> 4
Strong growth — watch for overheating

Related concepts

  • Inflation Rate — Inflation measures how fast prices are rising. At 2%, things cost 2% more each year — acceptable. At 8%, your money loses value fast, and the Fed raises rates to fight it, which usually hurts stocks.
  • Unemployment Rate — The unemployment rate shows what percentage of people who want to work can't find a job. Below 5% is considered healthy. Very low unemployment (below 3.5%) can actually cause inflation as companies compete for workers.
  • Recession Probability — Economists combine yield curve data, unemployment trends, and other indicators to estimate the probability of recession. Above 30% is a warning; above 50% suggests recession is more likely than not.
  • Consumer Confidence — Consumer confidence surveys ask regular people if they feel good or bad about the economy and their finances. Since consumer spending is 70% of GDP, when people feel bad, they spend less, and the economy slows.