Bureau of Economic Analysis
What Does the BEA Do?
The BEA analyzes data and releases reports on U.S. production, income, spending, and trade. It collects exhaustive amounts of data from businesses, summarizes it, and presents it regularly. The BEA does not interpret the data or forecast trends.
The BEA and GDP
The most important of the BEA's economic reports is Gross Domestic Product. It tells you how much the United States produced in the last year. It's calculated for each quarter, and updated monthly. The BEA also calculates the GDP growth rate, which tells you how fast the economy grew. A healthy rate is between 2-3%.
The BEA breaks out detailed reports on some of these components of GDP:
- Personal Consumption Expenditures tells you how much Americans are spending. This drives 70 percent of the economy, so it's really important.
- Trade: The BEA reports on the U.S. balance of payments, including U.S. imports and exports. When exports are greater than imports, it contributes to GDP.
Here's more on the Top 5 U.S. GDP Statistics, and How to Use Them.
How the BEA Affects the Economy
The BEA reports influence virtually all financial and business decisions. For example, when the BEA reports that GDP did not rise as high as expected, the stock market drops and businesses may not invest in new capital, anticipating a recession.
Use the BEA Reports to Make Money
The BEA provides U.S. Economy at a Glance. It gives you a snapshot of all its most recent indicators. You can also sign up for the BEA email newsletter, and choose the indicators you want to be updated on.
However, you also need to understand how they fit into the big picture, by understanding the 4 phases of the business cycle.
If, for example, GDP growth is 3-4 percent, you'll know that the U.S. economy is in the expansion, and possibly even irrational exuberance, phase of the cycle. You'll be on the lookout for a contraction. The BEA may not report a contraction until a month, a quarter, or even a year until it's over, thanks to its many revisions. However, you can't possibly know where we are in the business cycle without a thorough understanding of the BEA's GDP report.
In addition to the BEA's reports, you'll want to follow all these Leading Economic Indicators. For example, if GDP is 4 percent, but the Durable Goods Order Report shows future business orders are down, you'll know a contraction is probably pending. For more, see How to Profit From the Business Cycle.
While all these reports are in fact covered by reporters, who give you their insights, they are often dramatized and taken out of context. By both viewing the media coverage and reading the reports yourself you can separate the true information from the drama. Reading and understanding the BEA reports is essential if you hope to “get a jump on Wall Street.”