Germany's Economy Shrank at a 1.0 Percent Rate, not 0.25 Percent

One of the simplest ways in which the media could improve their reporting is by reporting numbers in ways that make sense to their readers. When the Washington Post told readers that Germany's economy shrank by 0.25 percent in the 4th quarter, I would suspect that more 99 percent of readers thought this was an annual rate of decline, which is way numbers are always reported for the United States.

In fact, this is a quarterly rate of decline, which is the standard practice in Europe and much of the rest of the world. It is not hard to convert quarterly growth numbers to an annual rate. For small numbers, multiplying by four will do the trick. (For larger numbers it is necessary to take the growth figure to the 4th power, but that still is not hard.)

Article Shortage
written by Frankly Curious, January 12, 2012 9:58 AM

You have one of the best blogs on the internet, but I'm afraid you are suffering from a definite article shortage today. I guess I'll have to set up an archive over at Frankly Curious, but for now, just feel free to cut and paste:

a
an
the

I *am* really sorry. I love your blog: it is one best. Internet would much worse if we didn't have your insights on news and world. Keep up good work!

And I am even *more* sorry now!

You don't just raise the growth rate to the 4th power
written by Hospital Administrator, January 12, 2012 3:00 PM

Dean - this is a nit, but you can't just raise the quarterly growth rate to the 4th power to annualize it. I assume you were just using shorthand, but for those who may have been confused, the actual formula is Annual Growth Rate = (1+Quarterly Growth Rate)^4-1. So for this example, the result is 1.004%. Just multiplying .25*4 does yield a value that is very close to the formula’s result. Dean is correct in that as the quarterly growth figure gets larger, just multiplying it by 4 begins to diverge more significantly from the precise number (it will actually yield a much lower value than by using the formula since simply multiplying by 4 ignores the compounding of each prior quarter’s growth). Again, I am sure you wrote this in shorthand, but wanted to clear that up for other readers.
Keep up the great work! You are a voice of rational reason during our current time of irrational rants from both the left and the right.

Hospital Administrator
written by Union Member, January 12, 2012 8:28 PM

Thanks for the math tip. But it's very difficult to agree with your last statement that we live in a "time of irrational rants from both the left and the right.

Just from today, please see Krugman's Blog:

http://www.truth-out.org/deliberate-deception-us-blaming-fannie-and-freddie-crisis/1326316248

Hospital Administrator
written by Union Member, January 12, 2012 8:57 PM

And then there is this:

http://www.truthdig.com/eartotheground/item/ millions_of_americans_to_be_driven_into_poverty_study_s
ays_20120112/

I would love to see a poor person given the opportunity to say a word, much less "rant" in today's Media, or in Washington.

Germany's Economy Shrank at a 1.0 Percent Rate, not 0.25 Percent

About Beat the Press