Statistics: What GDP Growth Signals
Updated 2/12/20, Posted 2/4/14
By Jean Regan, President & CEO
In this seven part series, I’m focusing on different commonly referenced indicators and explaining their impact. These indicators are (1) the unemployment rate, (2) the inflation rate, (3) housing sales and starts, (4) the Federal Reserve’s Monetary Policy, (5) retail sales, (6) ISM non-manufacturing and manufacturing index, and (7) GDP growth.
Ever since the stock market crash in 2008, the health of the U.S. economy has been under heightened scrutiny by many economists. Since one of the main measures of the economy’s health is the growth in GDP, let’s take a minute to explore what it means, where it’s headed, and how it impacts the logistics industry.
How do you define GDP growth?
In the U.S., GDP growth is simply the output of goods and services produced by labor and property located within the United States. For each month, the Bureau of Economic Analysis (BEA) regularly produces three reports to measure the changes that are occurring. These reports are an Advance Estimate, a Second Estimate, and a Third Estimate.
Countries outside the U.S. also measure their GDP. A Guardian article poses an important question about the relationship of the top GDPs in the world:
“Here is a puzzle that preoccupies futurologists, business strategists, economists and the world's foreign offices. Who is going to do best or worst economically over the next 15 years out of the world's current top 10 economies? In 2013, the US is comfortably number one, twice the size of China and two-and-half times the size of the number three, Japan. After Germany at fourth comes a cluster of countries with less than a trillion dollars of GDP separating them.”
Tracking which countries are on the decline or rise could help a company to prepare for a potential loss or identify an opportunity.
What does GDP growth mean for the economy?
The GDP is one of the most watched economic statistics. Stock brokers, investment bankers, the Federal Reserve and others make decisions based on this figure, and that impacts businesses and individuals alike. As the GDP grows, analysts expect industry investment to increase.
What does GDP growth mean for the logistics industry?
A Financial Times article “US GDP: Five Things You Need to Know” notes that “The single most useful number in the GDP release is not the top line but a figure called 'final sales of domestic product'". It strips out inventory movements to report how much stuff the US economy actually sold to buyers both at home and abroad.
This figure is especially important to the logistics industry since it measures the amount of goods that are produced and will need to be moved. If GDP figures continue to increase or increase at a higher rate, it will likely bring greater transportation needs to shippers, carriers, and 3rd party logistics companies. It’s certainly something to watch.
How have you seen GDP growth influence the logistics industry? Are there any tools you use to keep an eye on GDP growth? Comment below to share.