Samuel Blodget was an early American merchant, amateur architect, and economist. He wrote Economica: A Statistical Manual for the United States, considered to be the first American book on economics. The modern concept of Gross Domestic Product was developed by Simon Kuznets in 1934. Methodology has changed over time, along with the economy, and the current measure is not without its flaws – but it is the broadest measure of the economy’s strength.
According to the Bureau of Economic Analysis, the National Income and Product Accounts provides “a comprehensive view of U.S. production, consumption, investment, exports and imports, and income and saving.” As we all know from Econ 1, Gross Domestic Product measures the value of the goods and services produced by the U.S. economy in a given time period (usually quoted as quarterly at an annual rate). Real (constant $) GDP is simply nominal (current $) GDP adjusted for inflation.
GDP is made up of many components, each with their own methodologies. Details arrive over time. The advance GDP estimate, which is released in the month following the end of the quarter, is based on preliminary data. The 2ndestimate, released a month later, is based on more information. The 3rd is a more complete picture. As we see regularly, the reported GDP growth figure can change a lot with each estimate, but the underlying story typically does not change much.
Once a year, in late July, we get annual benchmark revisions to the GDP data. This can include methodology and definitional changes, but more often, the revisions simply reflect better estimates of the GDP source components. Such “garden-variety” revisions often shift growth from one quarter to the next, but not necessarily much higher or lower overall.
Note that GDP data are reported on a seasonally adjusted basis (unadjusted figures will begin to arrive with the 2018 benchmark revision). Over the last several years, there appears to have been some residual seasonality in the GDP figures. Specifically, first quarter growth figures have been significantly lower than in quarters two through four. That likely reflects a permanent change in behavior following the financial crisis. If there are permanent shifts in the seasonal pattern (for example, less variation in winter consumer spending as the population growth moves to the south and west), the seasonal adjustment will adapt over time. The Bureau of Economic Analysis is aware of seasonal anomalies and is working on it, but we won’t see residual seasonality removed until the 2018 benchmark revision.