U.S. vs. Eurozone GDP

February 17, 2014 § Leave a comment

USGDP

Economists closely watch the quarterly change in gross domestic product as a sign of a country’s economic well-being. A contraction (aka negative economic growth) in GDP for two consecutive quarters is the technical indicator of a recession.

Here’s the catch: the U.S. and Eurozone calculate the quarterly change differently. If you want to chart the figures together one set needs to be recalculated.

The details:

The U.S. expresses its GDP figures as a quarterly change at a seasonally adjusted annual rate, or what the quarterly rate would be if it continued for four quarters. The Bureau of Economic Analysis does this to make it easier to compare a quarter’s rate to rates in previous years. The Wall Street Journal chart above is a good example.

The Eurozone expresses GDP as a straight change from the previous quarter, not at an annual rate. See the chart below from the National Post.

If you want to compare Eurozone GDP to U.S. GDP your best bet is to recalculate the Eurozone GDP at an annual rate. I’m not going to step you through it, since the BEA already does an excellent job of it at this link:  http://www.bea.gov/faq/index.cfm?faq_id=122. You will need to get the quarterly GDP values (not the percentage changes) to make this calculation.

eurogdp

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