GDP is a lot like the speedometer on your car.
It can tell you how fast or slow the economy is going - it just doesn't necessarily tell you oif its going in the right direction. But still its really important to try to to measure economic growth.
So GDP -- which stands for gross domestic product - basically tries to measure the total dollar value of all goods and services produced over a specific time period in our country.
Of course it has its flaws. It also doesn't include unpaid services - like childcare and unpaid volunteer work. And It doesn't count environmental costs.
Not to mention the benefits of tech are just so hard to quantify.
Still, economists make an attempt each quarter and put out a GDP number.
And the market reacts to it.
While it's always happy to see an increased number, be cautious. If GDP growth is too fast, the Federal Reserve may raise interest rates to slow things down.
On the flipside, if GDP is slowing down, or God forbid, is negative, the recession mongers come screaming and it could mean layoffs and a drop in business revenues...so....
Now many will argue GDP is not the end-all-be-all because it doesn't take int o account the other things that go into a country's standard of living - levels of health and education, income equality, increases in tech.
But that's the stuff that tells you if the country is going in the right direction
Still GDP is important to the traders and will move the market, so pay attention.
Just remember to think of it as your speedometer -- not your GPS.
For more investment tips follow me @tracybyrnes
