Saturday, August 5, 2023

Playing Games with GDP Numbers: China’s Growth Has Not Slowed to a Crawl

 Playing Games with GDP Numbers: China’s Growth Has Not Slowed to a Crawl

Dean Baker, via Patreon

GDP growth in the United States is always reported as an  annual rate. This means that if the economy grew 0.5 percent from the  first quarter to the second quarter, it would be universally reported as  2.0 percent growth, with reporters always giving the annual rate. This  is basically four times the quarterly rate. (It’s actually the first  quarter’s growth rate taken to the fourth power, but this will be the  same for small numbers.)

This is a simple and obvious point. It is not something that is  debated among reporters or economists, it is just a standard that has  become universally accepted.

Many other countries do not report their growth numbers as annual  rates. They report a quarter’s growth number at a quarterly rate. That  is fine, there is nothing that makes the use of an annual rate better,  the point is that everyone should know that the number is being reported  as a quarterly rate, if that is the case.

I have often railed at news stories that have reported another  country’s growth number, without telling readers that it is a quarterly  rate. That obviously gives a very distorted picture.

Fareed Zakaria committed this sin today in a Washington Post column that told people that China’s economy is stuck in a rut. Zakaria told readers:

“China’s economy is in bad shape. Economic growth last quarter came in at 0.8 percent, putting China at risk of missing the government’s target for the year.”

Since Zakaria did give a link for his growth figure it was easy to  click through and see that the 0.8 percent figure was in fact a  quarterly growth rate. This translates into a 3.2 percent annual rate.  Zakaria is right that this growth rate is a disappointment for China,  but a 3.2 percent rate is very different from a 0.8 percent rate.

I’m sure Zakaria is well aware of the distinction between a quarterly  growth rate and an annual rate. I’m also sure he would not have made  this sort of mistake on purpose. He could have made his point just fine  using the actual number.

But it does reflect extraordinary sloppiness on Zakaria’s part, as  well as the Post’s proofreading system, that this mistake was not caught  before it found its way into print. I would hope that the Post would  correct it, but I know that the Post’s opinion editors do not care about correcting mistakes.