Reports now say the US GDP shrank 5.5% on the annual basis in the first quarte.  Experts predict the GDP number is going to turn positive by end of the year. The financial market has been positively responding to the data. This sounds little to me. GDP is a complicated economic indicator. But in general, it doesn’t really mean much, especially when comparing to the unemployment rate and the consumer sentiment which are still in the worst conditions.

I remember a great story told by a MBA student about GDP.

Some years ago, when two business school students, A and B,  were walking in campus, they suddenly discovered a pile of dog dung sitting on the street. I guess there were bored, so A joked with B by saying I will give a million dollars if you swallow the pile. B pandered for a moment and determined it is a great deal. So he moved the entire pile into his stomach. Then he asked student B for one million dollars. Student A shook his head and replied, “put it on my account”. Several days later, they saw the same thing while walking together again in the campus. B said to A, if you do what I did last time, your account will be cleared. A swallowed it immediately with a relief as he felt he wouldn’t have to carry the debts for life.

They then went to see their professor and told professor the story. The professor jumped from his chair and shouted, “that great, congratulations, you two have just contributed two million dollars to our nation’s GDP!”

Wow, a pile of dog dung worth one million GDP, can we really use the GDP numbers to measure the economic health?