European Economic Growth: Can We Make Reporters Multiply by 4?

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Saturday, 13 November 2010 08:07

In the United States economic growth numbers are almost always presented as annual rates. In Europe and much of the rest of the world they are typically presented as quarterly rates. This means that if a reporter simply presents the official rate from a government agency, as the Post did in an article on the debt crises in Ireland and Portugal, they will be giving readers a quarterly growth rate. This will likely leave a large portion of the paper's readers confused as to actual growth rate.

It is a very simple matter to convert a quarterly growth rate into an annual rate. The proper way is to take the 1 plus the growth rate to the fourth power, an operation that could be done in far less than a second by almost any calculator produced in the last 15 years. However, for small numbers, like the 0.4 percent growth figure reported for the euro zone last quarter, it is just fine to multiply the quarterly rate by 4 to get a 1.6 percent annual rate.