GDP Deflator measures the change in prices of goods and services and it is considered as a key indicator for inflationary pressures in the economy. It is a quarterly economic indicator released by the Bureau of Economic Analysis from the US Department of Commerce. Real GDP can differ a lot form nominal GDP, as the nominal GDP includes inflation, while the real GDP does not. The GDP Deflator shows the actual effects of inflation on GDP by providing a value which can be analyzed over time providing important trend on the inflation rate. The GDP Deflator is calculated dividing the nominal GDP by real GDP, and then multiplying the value by 100.Its value is in Index Points, and there is a base of value, with year 2009=100 and is also seasonally adjusted. In economic theory the best scenario for GDP growth is to have consistent economic growth with low inflation, so the GDP Deflator is closely monitored as it reflects the actual level of GDP growth over time taking into consideration the impacts of inflation.
The United States GDP Deflator
The United States GDP Deflator latest reading for the 1st quarter of 2017 was 112.77 Index Points, higher than the reading of 112.23 Index Points for the 4th quarter of 2016.From the month of July 2014, the United States GDP Deflator shows an uptrend. The average value for the United States GDP Deflator for the period of years 1950-2017 is 45 Index Points. The all-time high price of the reading for the indicator was 112.77 Index Points in the 1st quarter of 2017, the most recent economic reading. The all-time low reading for the indicator was 13.49 Index Points during the 1st quarter of 1950.The GDP Deflator is sensitive both to the actual readings of nominal GDP values, but also to the readings of inflation, and is monitored closely by the Fed, as its recent uptrend gave some evidence of inflationary pressures, and led to two interest rate hikes so far in 2017, while there is al least one more expectation before the end of the year.
