Why GDP Misleads About Economic Growth

Today it was reported that Germany supposedly only had 1% in real year over year GDP growth.

Yet nominal growth was according to the same report 3% while inflation statistics reported near zero inflation numbers. Similarly, in the first quarter the U.S. economy allegedly only grew 0.2% in the despite a siginificant increase in both employment and real wages. Yet nominal growth was 0.2% while the index for domestic purchases fell by a full 1.6%.

The value of economic activity for a nation is of course the nominal value it has given the prices of the goods and services they purchase, not the prices of the goods and services it sells. The latest GDP numbers for the U.S., Germany and most other net oil importers misleads by disregarding the gains from cheaper oil.

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