Market Commentary

GDP and Trade

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Every quarter the government reports the health of our economy and one of the main ways they do that is providing the numbers for Gross Domestic Product. This is the measurement of economic activity for the most recent quarter. They then take all four quarters of the year and report the annual GDP growth or shrinkage for our economy. Almost every country does the same thing.

Obviously, these reports also tell us the size of the economy or else you couldn’t determine the growth or shrinkage. The U.S. economy is about $20 trillion in size and is by far the largest in the world. The next largest is China at about $14 trillion. Then comes Germany, Great Britain and Japan all running about $5 trillion. Russia is about $1.5 trillion, very small compared to most advanced economies and it could be considered a third world economy.

The size of the U.S. and China is what matters because as goes these two countries so goes the world. If they fall into a recession the world is not far behind especially in a free economic environment where trade flows around the world. You can understand why the trade dispute between the two largest economies is so important.

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