The total output of the U.S. economy increased at an annual rate of 1.9 percent in the fourth quarter of 2016, the Commerce Department reported Friday. But beyond that headline-making number is a slew of data that shows more detailed trends and the uncertainty inherent in economic data collection.
To get a better view of how the economy is doing, it's important to look past that one headline number at the makeup of GDP and other measures of economic activity.
Each month through the Bureau of Economic Analysis, Commerce reports the gross domestic product (GDP — basically the total amount of stuff and services Americans produce) for the most recent quarter. There's the first release, which is called the "advance estimate," and then two further estimates that follow.
A recent CNBC analysis showed that the error rate in the second and third estimates have been the same over the past three decades. What's more, the government statistics got the direction of growth wrong about a third of the time. That means that a GDP first estimated to be higher than the previous quarter could in fact be lower.
For that and other reasons, it's often best to look at economic data including GDP growth over a longer period of time. That helps to focus on trends rather than potentially noisy movements in the data. To that end, GDP has increased an average rate of 2.1 percent over the past seven years.
Economist also look at another famous measure of the nation's economy, GDI, which measures the same thing but from the income side. Ideally, GDP and GDI should be equal (after all, if one thing is produced and sold, it's also purchased by another party). But in reality, the two measures are often different — a phenomenon known as "statistical discrepancy" — so the BEA also reports an average of the two figures.
Quarterly growth in the arithmetic mean of the GDP and GDI averaged 1.6 percent over the 12 months ending in September. The BEA's advance estimate doesn't include GDI so the average can only be calculated for the second and third estimates.
Some economists have argued that our current measure of GDP is out of touch with the economy. The government has made efforts to keep that metric up to date, but some economists argue that it's still behind the times. The country and the economy have both changed significantly since we began measuring output: Both in the makeup of demographics — age groups participating in the labor force, women entering the workforce and the retirement of the baby boomers — and a shifting economic profile.
The government's GDP measure tracks all expenditures on final good and services produced in the country. It's calculated by adding up total consumption plus total investment plus total government spending plus net exports. Individually, each of those components can change substantially over time. Here's how the most recent release stacks up against a year ago and a running average:
