GDP stands for ‘gross domestic product’. It can be measured in cash terms (‘nominal GDP’) or in inflation-adjusted or real terms (‘real GDP’). This section focuses on real GDP, which is a measure of the volume of goods and services produced in the economy. We split the discussion into sections that cover our:
- near-term GDP forecast
- medium-term GDP forecast
To forecast real GDP growth we use a range of approaches:
- over the near term, our forecast is informed by high-frequency survey indicators, which we use to determine the current degree of ‘momentum’ in the economy;
- beyond the near term, it is informed by our estimate of the output gap and the rate at which that output gap is expected to close. This ‘top-down’ approach is also informed and supplemented by the outlook for the individual expenditure components of GDP; and
- if the output gap is expected to close within the forecast period, we would generally assume that GDP grows broadly in line with potential output over the remainder of the forecast.