The business sections of the print media are replete with columns trying to impart financial literacy to their readers. Problem is, a lot of the business and finance reporters themselves are woefully lacking.
Last night two business economists were being interviewed on the CTV evening news about the strong Canadian GDP data released earlier in the day. GDP rose at a 2.6 percent annualized rate in the final quarter of 2016, way above expectations, as you can read here.
First up, the interviewer was completely foxed by the fact that a fall in imports in any particular period has the statistical effect of raising the GDP growth rate*, although it has to be said that the two economists did a very bad job of explaining what happened. Imports in Q3 had been boosted by the importation of a massive piece of offshore drilling equipment; that didn't recur in Q4, so imports appeared to fall at a double-digit annualized rate, and that increased GDP growth.
That's a bit technical, so maybe we can give the interviewer a mulligan there. Not on the next doozy, though. One of the economists said that if Canada's economy lagged the US, the Bank of Canada would not follow any rate hikes by the Fed, and that might cause the CAD exchange rate to weaken, "maybe to 1.40". The reporter visibly flinched and said "So, a 60-cent dollar then"! Well, no, the reciprocal of 1.40 is actually 71.42 cents (US), which is only a few cents weaker than the currency is presently trading.
It's hard to come up with any real excuse for such an elementary error, especially as the strength or otherwise of the Canadian dollar is a staple of every business news bulletin. No wonder the Canadian public has so much trouble managing its finances!
* In simplified terms, GDP = C + I + G + (X-M), where C = consumption, I = investment, G = government spending, X = exports and M = imports. So if the change in M is negative, that boosts GDP.
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