Trading the News - Economic Numbers - GDP Part 1

This video explains the basics of the GDP, or gross domestic product.  GDP is the total value of all goods and services produced in the economy.  GDP also allows us to compare the growth rates and economic activity of different countries.  Quarterly GDP estimates are released every month.  

An explanation of what traders look for in the GDP number is then covered.  Traders will focus heavily on the growth rate in the GDP release and markets will react to revisions that are made in the preliminary and final GDP numbers. 

The speaker goes on to explain the difference between the first release (advancecd numbers estimate), second release (preliminary number updated estimate) and the final number.

If the economy heats up too fast, the fed will have to use its monetary policy to lower economic growth and prevent massive levels of inflation.  The top in 2000 and 2007 in the stock markets both were great examples of what can happen when the economy heats up too far too fast. 

Most traders feel that the maximum an economy can grow is 3% a year to remain healthy and not overheated. 
Tim Ord
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