NYT Makes EU And Other GDP Contractions Look Less Awful By Comparing Them To Annualized US Figures
I had no idea the financial situation at the New York Times was so desperate.
Somebody, anybody — Please spring for a $3.49 calculator like the one pictured at the far right for Times reporter Matthew Saltmarsh. And if you’ve got another few bucks, pass them on to the Times’s home-page headline writers, so they can present something more understandable to US readers than what you see to the left of the calculator.
Saltmarsh reported all first quarter Gross Domestic Product (GDP) contraction figures from Euro-zone and European countries on a “from the previous quarter” basis (a longstanding EU custom), and presented the first quarter 2009 GDP contraction in the U.S. as “annualized” (which is our custom).
But Saltmarsh and Times headline writers never converted the U.S. result to make it comparable to that of European countries — hence the urgent need for the calculators.
Here are most of the relevant paragraphs from Saltmarsh’s report:
Euro-Zone Economy Shrinks 2.5% in Quarter
….. Gross domestic product (in the Euro-Zone) declined by 2.5 percent during the first quarter from the previous quarter in the 16 nations that use the euro currency and the 27-country European Union, according to an initial estimate from Eurostat, the E.U.’s statistical office. Both regions had seen their economies decline 1.4 percent in the fourth quarter of 2008.
In Germany, the largest European economy, gross domestic product plunged 3.8 percent in the first three months of the year from the fourth quarter, when it fell 2.2 percent, the German Federal Statistics Office in Wiesbaden said. Economists had forecast a 3 percent decline.
…. The French economy also shrank for the fourth straight quarter as companies cut investments and exports plunged. The economy shrank 1.2 percent from the fourth quarter, when it slipped 1.5 percent, the French statistics office Insee said. Insee also revised earlier data, revealing that France has been in a recession since the third quarter of 2008.
In Italy, the economy also contracted for a fourth straight quarter in the three months through March. The Italian economy shrank 2.4 percent from the fourth quarter, when it contracted by 2.1 percent, Istat, the statistics office in Rome, said. It was the biggest decline since the agency began publishing data in 1980.
Spain released data Thursday showing its economy shrank by 1.8 percent during the first quarter compared to the fourth quarter.
…. In the United States, gross domestic product shrank at an annual rate of 6.1 percent from January through March, its third straight quarter of decline.
…. The Hong Kong economy shrank 4.3 percent in the first quarter from the previous three months, the worst performance since records were first compiled in 1990 as plummeting exports hurt investment and consumption, Reuters reported from the city Friday.
Performing data conversions that Saltmarsh and the Times either can’t or won’t do, here is how the U.S. economy’s dismal performance in the past six months compares to the Euro-zone as a whole, and to the other countries identified (pending revisions in first quarter 2009 data):
Where comparisons are possible, only France(!) fared less poorly than the U.S. during the six months ended March 31.
Many Times readers likely will come away from Saltmarsh’s work thinking that the Euro-zone’s economy, those of most of its individual countries, and perhaps many of the rest of the world’s economies, aren’t performing nearly as badly as ours, when the fact is that they are largely performing even worse. The majority of those who only see the Times’s home-page headline will probably also believe that the Euro-zone is outperforming the U.S.
Readers of this post will have no such problem.
Cross-posted at NewsBusters.org.
They wouldn’t need to spend $3.48 if they used the calculator program on the computer they used to write the propaganda piece.
Comment by dscott — May 15, 2009 @ 1:53 pm
That is actually innacurate: two conditions contribute, one is currency (it seems the dollar looks stronger per Euro standards) and the allocation to 2000 USD values – the link should help to understand the economy actually contracted 3.5%, the EU economy contracting 2.5% in the same period [http://www.bea.gov/national/xls/gdpchg.xls]
Good day
Comment by Anonimous — May 16, 2009 @ 10:23 am
#2, the currency issue isn’t that relevant, because we don’t import of export that much. as a % of GDP.
Unless I’m missing something, the spreadsheet link you suggested isn’t relevant to the point you’re trying to make. Your link has to do with inflation, and the 3.5% listed is STILL an annualized figure.
Comment by TBlumer — May 16, 2009 @ 10:59 am
Your argument would indeed be valuable TBlumer in the sense that annualised would signify the proportion is as described in the published table – yet, the BEA is explicit:
“Current-dollar GDP — the market value of the nation’s output of goods and services — decreased 3.5 percent, or $124.8 billion, in the first quarter to a level of $14,075.5 billion. In the fourth quarter, current-dollar GDP decreased 5.8 percent, or $212.5 billion.”, 124.8 being 0.89% (roughly) of the total GDP. The Eurostat reported for 2007 Q4 a 0.5% increase in GDP and it is equivalent to the amount stated statistically [http://bit.ly/JZUoT] leading one to conclude these are the effective contraction rates in Euros, I suppose. For the quarter, that is. Comparison would have to attend to the dollar value one might suppose – the fact is the GDP in the USA decreased 0.88% in the quarter and the EU GDP decreased 2.5%? It seemed so until I found this data for USA in EUR for Q3 and Q4 2008 – 2394152.8 2693531.9 (!), so as to say it grew.
The differences in currency mean the GDP’s cannot be taken into account by the EUR table otherwise the USA would be growing and no recession would exist! The comparison should be made between the figures 0.88% and 2.5%, a huge difference attenuated by the dollar difference, 1.5% in EUR after conversion. PPP wise it would make a difference, I suppose but then again…? Simply put, the statistics cannot be compared within the Eurostat comparison for the explained above – but the 0.88%, 2.5% can
Comment by Anonimous — May 16, 2009 @ 5:28 pm
#4, unfortunately BEA is not good at specifying when they are and aren’t annualizing. Your quote should read:
“Current-dollar GDP — the market value of the nation’s output of goods and services — decreased at an annualized rate of 3.5 percent, or $124.8 billion annualized dollars, in the first quarter to a annualized level of $14,075.5 billion. In the fourth quarter, current-dollar GDP decreased at an annualized rate of 5.8 percent, or $212.5 billion annualized dollars.”
“Current dollar” means “igroring inflation.” The 1Q09 annualized decline of 3.5% is because of a 0.7% reduction in prices during the quarter. Annualizing -0.7% makes it -2.8%. The reported 6.3% after considering inflation (actually, deflation) minus the 2.8% annualized deflation leaves -3.5%.
Our annualized GDP results and the Euro-zone’s quarterly versions are inflation-adjusted, otherwise known as “real.” Thus my conversions from “apples to oranges,” and from “oranges to apples,” are correct.
Comment by TBlumer — May 17, 2009 @ 1:27 pm