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Department of Commerce releases latest GDP estimate

The Bureau of Economic Analysis of the Department of Commerce released its third and most accurate estimate of real Gross Domestic Product for Q2 2017 today.

Real GDP grew 3.1 percent for the second quarter of Fiscal Year 2017, up from the 3 percent estimated last month and a solid increase from the 1.2 percent growth for Q1 2017. This is the highest rate of real GDP growth since Q1 of 2015, which was 3.2 percent.

This third estimate takes into account new data that was not available in previous estimates; it is considered the most accurate estimate of real GDP in any given quarter. The increase in real GDP in Q2 over Q1 was attributable to increases in exports, government spending and private fixed investment.

GDP is a measure of the total market value of goods and services produced within a nation’s borders in a fixed period of time. This includes everything from government spending to retail purchases. Politicians and the news media often will point to real GDP growth as an indicator of how the economy is doing, but while GDP is a useful measure of economic activity, it is lacking in a variety of areas. 

One of the major issues with GDP is that is not an accurate measure of social welfare. The United States is the largest economy in the world as measured by GDP, but it has an extraordinarily uneven distribution of resources compared with other developed nations. GDP also does not indicate whether the goods and services produced are beneficial to the society. If a country has high amounts of military spending but low social spending, GDP could be very high but social welfare would be abysmal.

GDP also does not take into account unpaid work such as raising a family or elder care. The Bureau of Labor Statistics estimates that 16 percent of the civilian non-institutional population (41.3 million people) provided unpaid elder care in the U.S. between 2015 and 2016. These socially beneficial and necessary activities are not counted in GDP estimates.

Economists have been attempting to create broader measures of economic activity that better reflect social welfare for the past several decades. The Index of Social Health (ISH), established in 1987, takes into account 16 human development indicators, including income inequality, health insurance coverage and child poverty. Since 1973, the ISH has decreased as GDP has increased in the United States.

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