The growth of a nation’s economy—and the way in which those gains are distributed among its citizens—is one of the most profound questions that economics asks. Understanding what economic growth means is important not just for economists, but also for governments and businesses, and for individuals themselves. Economic growth typically indicates that people and businesses are earning more, spending more, and generally feeling better off. If growth slows, companies may spend less, and individuals might earn or save less, leaving them worse off.
The broadest measure of economic growth is gross domestic product (or GDP), which measures the total value of goods and services produced by a country. There are several components of GDP, including consumer spending, investment, and government spending. Each of these can make large contributions to or subtractions from GDP growth at different points in time. Some components, like consumer spending, tend to grow at a steady rate over time, while others, such as mining investment, can have very large swings in their contribution to GDP.
Another crucial factor in economic growth is productivity. Without faster productivity growth, per-worker output would fall, and economies might struggle to keep up with global demand for the goods and services they produce. McKinsey research shows that some firms are refocusing their strategies to prioritize productivity. But the world needs to do more to increase productivity and boost growth overall.
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