We calculate the implicit GDP deflator by dividing the nominal gross domestic products (nominal GDP) by real GDP. It measures aggregate prices throughout the whole economy, and its change from one period to the next reflects the inflation rate of goods and services in the economy. Also called the GDP deflator.
Implicit GDP deflator = (Nominal GDP / Real GDP) x 100%
The GDP deflator has a broader component of goods and services than the consumer price index (CPI) or producer price index (PPI). Unlike CPI and PPI, it also prices the capital goods and imported goods and services. Therefore, the statistic is considered a more accurate measure of the change in the general price level than the CPI and PPI.
The disadvantage is that data is released less frequently than CPI or PPI. It is available quarterly and annually, depending on the release of GDP data, whereas CPI and PPI are available every month.
