The Corner

The Economy

Two Points about the GDP Numbers

(1) You’ll see a lot of reports that second-quarter GDP fell 33 percent, but this isn’t really true. Specifically, this is an “annualized” number; it means that if GDP kept falling at its second-quarter rate of decline for an entire year, we’d end up down by about a third. This type of number is sometimes useful, but it’s profoundly unhelpful when we’re talking about the economic damage of deliberate, temporary lockdown measures.

Actual second-quarter GDP is about 10 percent below first-quarter GDP, $17.2 trillion vs. $19 trillion (in 2012 dollars) — which is bad enough, considering the pandemic somewhat reduced first-quarter GDP too, from $19.3 trillion in the last quarter of 2019.

(2) Apparently the stock market fell on this news, but it really shouldn’t have been surprising. Even in late March and early April, this was roughly the GDP hit that financial gurus projected. Goldman Sachs predicted a 34 percent annualized GDP decline in the second quarter; Morgan Stanley said 38 percent; JPMorgan said 40 percent.

These folks also predicted a strong recovery in the third quarter. Let’s hope they were right about that, in light of the second wave in much of the country.

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