GDP stands for gross domestic product. It is the total value of all goods and services produced within a country during a specific period. GDP is usually calculated quarterly or annually and is used as a measure of the size of an economy. 

GDP shows how strongly an economy is growing or contracting.

GDP is calculated by adding up the value of all final goods and services, without double counting intermediate products. There are different ways to measure it, for example through total spending, total production or total income within a country. When GDP increases, it is referred to as economic growth. When it declines for multiple quarters, there may be a recession.

For investors, GDP is important because it provides insight into a country’s economic health. A growing economy can lead to higher corporate profits, while a shrinking economy can put pressure on profits and employment. However, GDP does not measure overall well being, as it does not account for income distribution or environmental damage.

Short example:

Suppose all companies in a country together produce €800 billion worth of goods and services in one year.

The year before, this amount was €760 billion.

GDP has therefore increased by €40 billion, indicating economic growth.

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