What are the problems in calculating GDP

DESTATIS - Federal Statistical Office

What does gross domestic product (GDP) describe?

The gross domestic product (GDP) is a measure of the economic performance of an economy over a certain period of time. It measures the value of domestically manufactured goods and services (added value), insofar as these are not used as intermediate inputs for the production of other goods and services. The gross domestic product (GDP) is calculated in current prices and price-adjusted (deflation with yearly changing prices of the previous year and chaining). Based on the previous year's price, the "real" economic development over time is shown free of price influences. The rate of change in the price-adjusted gross domestic product (GDP) is used as a measure of economic growth in national economies. The gross domestic product (GDP) is thus the most important variable in the national accounts and is one of the indicators of the dissemination standard of the International Monetary Fund (IMF).

How is gross domestic product (GDP) calculated?

The gross domestic product (GDP) in Germany is calculated on the production and use side.

In the production approach (production approach), the gross domestic product (GDP) is determined by calculating the added value of all producers as the difference between the value of the goods and services produced (production value) and the input consumption and then the taxes on goods (such as tobacco, mineral oil or value added tax) ) and deduct the subsidies on products. The following overview shows an example of values ​​for Germany for 2015 at current prices in billions of euros:

Production value5 574,795
-Advance payments2 852,775
=Gross value added2 722,020
+Taxes on goods less subsidies304,160
=gross domestic product3 026,180

Another way of calculating gross domestic product (GDP) is on the demand side. In the context of the usage calculation (expenditure approach), the expenditure for the end use of goods and services is determined, i.e. private and state consumption expenditure, investments and external contributions (= export surplus = exports minus imports). The order of magnitude is shown in the following overview as an example for 2015 at current prices in billions of euros:

Private consumer spending1 602,969
+State consumer spending595,908
+Gross investments (including changes in inventories)597,457
+Exports1 419,906
Imports1 190,060
=gross domestic product3 026,180

The calculation of the gross domestic product (GDP) on the distribution side is not possible in Germany due to a lack of basic data on corporate and property income. The distribution calculation shows the incomes generated and paid in the course of production activities: employee remuneration of residents, corporate and property income, production and import taxes to the state, state subsidies, depreciation, primary income from or to the rest of the world. The following overview shows the orders of magnitude in billions of euros for 2015 as an example:

Employee remuneration (residents)1 564,814
+Corporate and property income687,942
=National income2 252,756
+Production and import taxes to the state minus subsidies299,629
=Gross National Income3 095,143
Primary income from the rest of the world (balance)68,963
=gross domestic product3 026,180

In the national accounts, the corporate and property income is the remainder.

When is the gross domestic product (GDP) published?

The gross domestic product (GDP) is calculated for years and quarters. The quarterly GDP is published for the first time in a so-called GDP quick report after approx. 30 days.This is followed by a recalculation of the GDP with more detailed results, which are published in a press release approx. 55 days after the end of the reporting quarter (i.e. the first quarter in May, the second quarter of August, the third quarter of November and the fourth quarter of February). The results of the previous quarters - in August of the last four years - are also updated. The first annual results are published in January around 15 days after the end of the reporting year at a press conference. The exact publication calendar can be viewed on the Internet. The quarterly data are consistently linked to the annual results.

How accurate is the gross domestic product (GDP)?

The early first publication of gross domestic product (GDP) data fulfills the user requirement for current results, although the data basis is often still incomplete at this point in time. The first preliminary results are revised several times to incorporate newly available statistical information and may differ from the final results, which are published every four years. In addition, so-called general revisions are carried out, which among other things serve to introduce new concepts and definitions as well as to include results from irregular or new surveys or censuses. In a multi-year comparison, the first preliminary results deviate from the final value by around half a percentage point up or down. For some sub-aggregates of gross domestic product (GDP), the average need for revision is significantly greater.