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

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.

This piece first appeared on Dean Baker’s Beat the Press blog.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC.