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What are some indicators of a steadily growing economy?

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Quick Answer

Some indicators of a steadily growing economy are an increase in gross domestic product and an increase in non-farm, payroll employment. In addition, low inflation is a measure of a growing economy because if economic growth outpaces inflation that means that economy is growing faster than the contemporaneous erosion of the currency's value.

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Full Answer

Because the gross domestic product is a measure of all goods and services in an economy, an increasing GDP is an indicator of a growing economy. Personal consumption, or the measure of individual spending, is a figure included in a GDP calculation. Increased personal spending is also an indicator of an expanding economy, because individuals have more to spend as an economy expands.

Increased employment rates are another indicator of a steadily growing economy because companies need workers to meet demand for goods and services. High employment rates tend to coincide with the overall health of an economy. While there is always some level of unemployment in a healthy economy as available goods and manufacturers change over time, low levels of unemployment indicate a large demand for employees resulting from healthy economic activity.

Inflation is factored into a GDP calculation so analysts can measure the economy's health as it compares to other time periods with varying inflation rates. Inflation indicates the value of economic activity that is lost in an economy because of increasing prices. If inflation outpaces actual economic growth, it is a sign that the economy is not expanding.

However, if an economy's GDP improves at a faster rate than the rate of inflation, it is a sign that the economy is seeing real, substantive improvement. Many different factors contribute to inflation in an economy such as a disconnect between supply and demand or consumer fears about a shortage of goods.

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