The gold standard of economic measures
Every day there seems to be a slew of economic data released, and some of it seems contradictory. Is there one number or statistic that best reflects the condition of the economy? N.C. State University economist Mike Walden answers.
“When I give talks about the economy and the economic outlook all around the state, I emphasize that, yes, there are a lot of numbers out there that can be confusing. But I tell my audience to really focus on one that’s called GDP, gross domestic product.
“The reason economists like this number (is) it’s very comprehensive. It really includes the economic activity – the economic income, the economic spending – that … all players in our economy are doing, from the farmer to the factory worker to the service worker to the university worker. Everyone, everything, gets combined into this one number. So, it’s very easy to track over time. It’s consistent.
“Secondly, it does actually allow us to compare the rates of growth and size of the economy between different countries, because by convention, all countries also use GDP as a comprehensive measure of their economy.
“Now as a rule of thumb, if we do see GDP fall for two consecutive quarters – that is, six months – that is enough to declare an official recession. Fortunately, that’s very unusual. Normally, GDP expands.”