Sunday, May 17, 2009

According to OECD, US GDP Fell By -1.6% in Q1

Bureau of Economic Analysis -- Real GDP -- the output of goods and services produced by labor and property located in the U.S. -- decreased at an annual rate of 6.1% in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP decreased 6.3%.

The Times of London -- The eurozone economy slumped by a record 2.5% in the first three months of the year, dragged down by Germany, which recorded the biggest drop in its GDP in nearly 40 years. The German economy, the engine room of the 16-nation eurozone, contracted by 3.8% in the first quarter of the year, battered by the fall in demand for manufactured goods. The US economy shrank by 1.6% in the same period.

MP: Notice how real GDP growth gets reported differently in the U.S. than in Europe. In the U.S., the quarterly real GDP growth rates are annualized by multiplying the quarterly percent growth rate by four (-1.6% quarterly x 4 = -6.4%, difference from -6.3% above due to rounding). European countries and the OECD report quarterly growth rates for GDP from the previous quarter, without annualizing. According to the OECD (data here) and the news report above, U.S. real GDP fell by 1.6% in the first quarter of 2009, and that rate is stated as a quarterly rate, not an annual rate.


At 5/18/2009 12:13 AM, Anonymous Charlie Arlinghaus said...

Imagine if the market were reported the same way: "The Dow climbed 83 points today, an annualized gain of 365%."

At 5/18/2009 1:36 AM, Anonymous Anonymous said...


At 5/18/2009 10:22 AM, Blogger Marko said...

I have heard alot of folks saying we should go back to the Clinton years, when things were supposedly great. We would need a hell of a lot of quarters dropping 1.6% to shrink our GDP back to when Clinton was President. Also, we would need to lose alot more jobs as well.

As to "so?", well, most people here the 6.1% figure and think our economy shrank by that amount in just one quarter - which is huge! If the actual number is only 1.6%, that seems significant to me. Not nearly as bad.

This seemed obvious.

At 5/18/2009 10:37 AM, Anonymous Norman said...

And the MSM reports "a drop of -6.4% in the quarter' and does not add, "at an annual rate". No wonder the populus is so ignorant.

At 5/18/2009 9:19 PM, Anonymous Anonymous said...

If journalists are too stupid to understand and explain Seasonally Adjusted Annualized Rates, does that make the -6.1 percent figure uninformative or misinformative?

Are we to drop the method of SAAR from analysis because the layman can't understand it?

Is it necessary that different nations all report their economic statistics in precisely the same manner for convenient comparison? Do all economies follow the same seasonal economic patterns? Hmmmm!

I think we should be more concerned when journalists use nominal and absolute measures when real and relative measures are appropriate.

- So

At 5/18/2009 10:50 PM, Blogger Hot Sam said...

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