Over the past several months, we have been inundated with a barrage of economic forecasts and growth numbers that have constantly reminded us that the world economy is in shambles. Point taken, however, the manner in which this reporting is being done is disappointing. My primary grief against the quarterly economic growth numbers that are being reported.
Economic growth is usually measured on a year-to-year basis, so as to have a meaningful time span for a useful comparison. So when papers report that the economy has shrunk 5% in the first quarter of 2009, this is in comparison with the performance of the economy in the first quarter of 2008. Normally, this sort of comparison is quite alright by me. However, we are in the midst of a well-known and well-advertised economic crisis. Everyone knows that last year, at this time, economies were doing quite alright, and in comparison, things are pretty lousy right now. So the year-to-year comparisons, that continue to be the sole numbers reported, are bound to be dreadful, i.e. 5-15% shrinkages depending on your country.
How is this information useful to anyone?? We've heard these year-to-year based economic forecasts almost monthly for the last 8 months. I get it! The economy is shrinking compared to last year. But is the situation improving on a month-to-month basis? Shouldn't we be interested in this so people can get an idea of whether the economy is showing signs of life? Economists and the media outlets have got to realize that they ought to start publishing economic indicators that compare the state of affairs today to what they were a month ago. Chances are, the numbers will look a lot less scary. People may gain hope if the economy, say, grows 2% in the second quarter of 2009 as compared to the first!
This seems just basic to me but for some reason, appears to be beyond those purporting economic news! Now, just consider what happens when we hit the last quarter of 2009. The year-to-year comparisons will now be based upon the last quarter of 2008, which was crap as we all know! So, the economic growth forecasts are likely to be mildly negative or even positive for this time period, assuming the economy does not sink much further than it already has. Just shoot me, when economists and news reporters hail the recovery of the world economy in the last quarter of 2009!!!! Show me how we are doing month-to-month and perhaps, how we are doing compared to a period before the onset of the economic crisis and then I'll read your economic forecasts with more interest. Till then, please stop claiming to have "expert" knowledge about the economy!
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