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Justin Fox

No, GDP Isn’t Really Going to Shrink 30%

The U.S. practice of reporting quarterly GDP growth as an annualized number is about to make the Covid-19 downturn look a lot deeper than it is.

Sign of the times.

Sign of the times.

Photographer: Gabby Jones/Bloomberg
Updated on

In the U.S., the headline gross domestic product number reported every quarter by the Bureau of Economic Analysis is the percentage change in GDP from the previous quarter, annualized. Other countries, and international economic-statistics compilers such as the Organization for Economic Cooperation and Development, tend to report just the quarterly percentage change and skip the annualizing.

I don’t know that one way is better than the other. The BEA’s version gives a more consistent view of the pace of GDP growth over quarters and years. The rest of the world’s approach gives a more realistic view of a quarter’s contribution to annual GDP growth.