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Home Publications Blogs Beat the Press Should The Eurozone Be Mourning or Celebrating Its 0.3 Percent Growth in the Second Quarter?

Should The Eurozone Be Mourning or Celebrating Its 0.3 Percent Growth in the Second Quarter?

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Thursday, 15 August 2013 04:52

That's a good question, but this Washington Post article probably won't help people answer it. A 0.3 percent growth rate sounds depressingly close to zero, but in fact this number refers to the quarterly growth, not the annual growth rate, which is the standard way of reporting growth numbers in the United States.

This one should be really simple. GDP growth data in the U.S. is always reported as an annual rate. Did anyone see a report that the U.S. economy grew 0.4 percent in the second quarter? Multiplying by four will quickly transform these quarterly growth numbers into annual rates. (Okay, to be precise you want to take the growth to the fourth power, as in 1.003^4.) There is no excuse for not reporting GDP growth numbers in a way that would make their meaning clear to most readers.

FWIW, I can't tell you whether the euro zone should be happy or mourning its 1.2 percent growth rate in the second quarter. Given the severity of its downturn, it's not much of a bounceback. On the other hand, it is certainly better than seeing another fall in output.

Comments (5)Add Comment
Factotum
written by Teeth, August 15, 2013 6:37
Why, to be precise, do you raise it to the fourth power. It would seem that there are 12 months in the year so it should be multiplied by 4? Does it have to do with compounding?
"[B]etter than seeing another fall in output."
written by Paul Mathis, August 15, 2013 9:17
Actually not. If output had fallen, policy makers in the EU would have had to re-examine their austerity insanity. As it is, they now feel vindicated by these results which are pathetic by any reasonable standard.
Yes it is compounding
written by Dean, August 15, 2013 9:52
Factotum,

you have to take the growth number to the 4th power because you assuming growth on growth. (doesn't matter much with low rates of growth.)
...
written by Marcus Walker, August 15, 2013 11:27
To be precise, it was 1.1% annualized, as WSJ readers learned. (We wrote annualized and simple quarterly figures.) 0.3 is rounded, from nearer 0.27.
1.1% break out the Champagne!
written by Mark Brucker, August 15, 2013 8:27
How awful. I'm guessing that probably means no growth per capita or close to zero...

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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