FOREX Trading Online arrow Fundamental Analysis arrow Economic Growth Indicators, Gross Domestic Product

Economic Growth Indicators, Gross Domestic Product

Gross domestic product, GDP is a major indicator which makes it possible to determine the level and the pace of economic development. The indicator of GDP involves all the valuables produced by the businesses on the territory of the country. The connection of GDP with forex is quite obvious and rather straightforward as the higher GDP is rising the stronger is the power of the national currency. This aspect is one of the most significant for the forex market.

The increase in GDP is accompanied by the increase in employment rate and the enhancement of living standards. That results in the rising consumptions of goods. The periods of economic growth can change the decline in productions and employment rates. Economic recession leads to the decline in GDP per capita which will worsen the living standards.In order to avoid this aftermath it is of vital importance to take into consideration such factors of the GDP growth as involvement of additional resources in the industry, increase in productivity due to the technological progress and professional development of staff.

If we pay attention to the formula of GDP, it will look like GDP=C+I+G+NE=PL+PR where C-consumption, I-investment, G-government spending, NE-NetExports=exports and imports, PI-personal income, PR-profits.

GDP of each particular year is determined by three methods: summarizing the incomes (remunerations, net taxes on productions, gross margins), summarizing the costs (the costs of final consumption and savings) and like the added index. All the calculations are handled at the nominal price on the basis of the data about the real operations.

GDP indicators are instrumental in order to predict the behavior of exchange rates. The GDP diagrams are available. AS for the Eurozone, it incorporates 17 countries. To make up a diagram for the comparative analysis a trader should consider the economics of the major developed countries in the Eurozone (Germany, France, Great Britain, Italy) and display the main tendencies on the summarizing diagram.

The GDP of Germany



The GDP of Great Britain


This method will help to single out the dynamics for the future behavior of exchange rates.