Output Gap

Get the Output Gap for a variety of countries over time from the OECD Economic Outlook. The output gap is the difference between actual Gross Domestic Product (GDP) and estimated potential GDP, expressed as a percentage of potential GDP. Potential GDP is the level of output an economy can sustain over the long term without generating excess inflationary or disinflationary pressure, based on the full, non-inflationary use of its productive resources (labour, capital and technology).

A positive output gap indicates the economy is running above its long-run potential (an economic “boom”, typically associated with rising inflationary pressure), while a negative output gap indicates the economy is running below potential (an economic “slack”, typically associated with rising unemployment and disinflationary pressure). The output gap therefore complements indicators such as the Inflation Rate and Unemployment Rate as a measure of where an economy sits within the business cycle.

The output gap is the OECD’s own estimate (the source’s figure, divided by 100 here).

The formula is as follows:

This data is only available on a yearly basis, since the OECD Economic Outlook is published as a set of annual projections and estimates.

The result is a decimal fraction of potential GDP (-0.0422), where the OECD publishes a percentage (-4.2231), like every other rate and ratio in this class. Multiply by 100 to recover the published figure. A small gap loses resolution at the default rounding of 4 decimals, so pass a larger rounding when the sub-basis-point detail matters.

Potential output cannot be observed, so the gap is an estimate, and the estimate for a given year is often revised substantially as later data comes in: the gap estimated at the time can differ by a percentage point or more from the one published years later. Treat recent values as provisional and compare the gap with other measures of slack, such as unemployment or capacity utilisation.

See definition: https://www.oecd.org/en/data/indicators/output-gaps.html

Also known as: business cycle gap, GDP gap.

Output Gap in Python or via the MCP

Install the Finance Toolkit with:

pip install financetoolkit -U

Then call get_output_gap as shown below.

from financetoolkit import Economics

economics = Economics(start_date='2018-01-01', end_date='2022-01-01')

economics.get_output_gap(countries=['United States', 'Germany', 'Japan'])

Or, after setting up the Finance Toolkit MCP, ask:

Which returns:

Parameters

get_output_gap accepts the following parameters.

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