There are a number of indicators that are used to measure economic growth or decline within a given period. Some of the most visible ones are as follows:
Unemployment rate: The unemployment rate measures the percentage of people who are able to work that are unable to find jobs. The lower the rate, the better the economy is doing. There are some caveats with using the unemployment rate as an indicator, mostly having to do with the fact that it does not measure those people who have left the workforce due to inability to find a job nor those who have taken lower-paying jobs or part-time work.
GDP: The Gross Domestic Product, or GDP, is another economic indicator. The GDP is the value of all goods and services produced in an economy during a given time period. If the GDP has risen since the last measurement, then economists say the economy is expanding. Unfortunately, the GDP cannot measure how much of a share actual people receive of this economic growth.
Consumer Price Index: The CPI is a measurement of prices in a so-called "basket" of consumer goods. It is used to get a sense of what people can afford to buy, therefore alluding to the standard of living. The CPI has to be understood in context of other economic indicators, because rising prices may be offset by economic growth and increased spending power.
Consumer Spending: Estimates of consumer spending are a powerful economic indicator, since people spend less money when they are either not doing well financially or not optimistic about their economic futures. Holiday and vacation spending are especially telling economic indicators.
Stock prices: Stocks and bonds are traded on markets, and the value of stocks is measured through averages. The Dow Jones Industrial Average, for example, measures the value of certain key stocks. Rising stock prices are usually viewed as an indicator of a strengthening economy.
https://www.investopedia.com/terms/e/economic_indicator.asp
Given that we live in a highly inter-connected globalised world, economic growth is not an isolated effect and depends on other countries' growth rates, in addition to the weightage of each indicator holding different values too.
To answer your question, it is important to highlight the difference in the calculation of economic growth, and the indicators that effect economic growth separately.
Economic growth is calculated by:
- Change (percentage) in real GDP (Gross Domestic Product) over a period of time: This looks at the total output of a nation, but the term real is used as it takes into account inflation rates and therefore reflects a realistic picture of actual output rather than nominal values that may be inflated due to increasing price levels
- Change (percentage) in real GDP per capita over a period of time: This looks at the total output per person, again using the term real for the same reason as above. This is similar to income per person, and therefore takes account of population growth rates too. If the income per person is rising, this shows the economy is growing.
Indicators affecting economic growth:
Physical capital: Increasing the quantity of infrastructure, machines, etc increases the overall level of GDP in the economy. Increasing the quality of these, however, increases the productivity of this capital. Technological advancements and innovation are the main stimulus to improving the productivity of capital today; with CAD (computer aided design) and CAM (computer aided manufacturing), the GDP per hour worked would improve.
Human capital: Any increase in the quantity of labour in the economy, as well as lower unemployment rates, would increase the overall level of GDP in the economy as more able people can contribute. This could happen through immigration for example (Germany in the 1960;s and 1970’s). Increasing the quality of labour, however, increases the productivity of this labour. Through investments in human capital through skill advancement, education, better health, etc, the GDP per hour worked increases as labour becomes more productive. The HDI (human development index) measures human development, and studies have shown the important role of this in economic development too.
Natural capital: Any increase in the quantity of marketable commodities such as minerals etc, and ecological resources such as soil, etc would increase the overall level of GDP in the economy as these are used for production. Investments in improving/ preserving natural resources can increase the productivity of these resources, as well as contribute to environmental quality and sustainability. For example, controlling over-fishing can avoid fish depleted seas and potentially avoid lower output. Institutional support (macroeconomic stability, law and order, etc) for these can indirectly impact the output produced from these.
International trade: Any improvements in international trade that would allow the PPC (production possibility curve) to shift to the right through countries trading through their respective comparative advantages would result in the GDP and/or GNP (gross national product which takes into account foreign remittances and removes payments sent abroad) increasing.
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