Who'd be an economist?

Americans (and those of us watching twitchily from just across the border) woke this morning to an array of news outlets reporting that the US economy contracted by 32.9 percent in the second quarter of the year. In the meantime, over in Europe, it was reported that the German economy shrank by 10.1 percent in the same period.  So, pop quiz: which of these two economies performed worse in the quarter.  I'll give you a clue: it wasn't the English-speaking country.

The US Department of Commerce reports its GDP statistics on an annualized basis.  The 32.9 percent figure thus shows how much GDP would decline if the rate of change seen in Q2 persisted for a full twelve months.  The actual quarter-to-quarter change was 9.5 percent -- still a dire number and still the worst on record, of course, but nothing like the precipitous fall that the media seemed intent on playing up this morning.

It's also a smaller decline than was recorded in Germany, which reports the straight quarter-to-quarter change.  That seems a bit surprising when you look at the relative performance of the two countries in dealing with the COVID pandemic.  However, it should be recalled that the US was slower to lock down its economy than most countries in Europe, and quicker to reopen. Which approach turns out to provide the better basis for a sustained recovery remains to be seen.

With my economics background I don't get confused by numbers like these, but they clearly bamboozle the journalists,  although to be fair, just about all of the media websites were reporting the numbers properly by later in the day.  That in turn means that the public is probably getting a false reading too.  It's not just that different countries report comparable data in different ways. Individual series within each country are reported differently too. To take just one example, the US reports its consumer inflation data on a year-on-year basis, rather than annualized or month-on-month.

Most of the time this probably doesn't matter: people who need to know precise numbers can figure them out quickly enough. But these are highly unusual times, and it would be good if regular citizens, who are relying on their political leaders to make literally life-and-death decisions, could form an accurate picture of what's going on in the world.  The statistical agencies aren't going to change, so it's really up to the media to try a bit harder to explain the data, rather than just seizing in the scariest number and scrolling it in large type across the bottom of everyone's TV screen.