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Data Insight: Which Growth Rate? It’s a Weighty Subject

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Abstract

The growth rate in real gross domestic product (GDP) is a conventional indicator of the economy’s health. But the two ways of measuring annual GDP growth can give very different answers. In 2013, GDP grew 2.2 percent on a year-over-year basis, but at a faster 3.1 percent rate on a Q4-over-Q4 basis. So, which measure is more meaningful? We show in this post that the Q4/Q4 metric is better since it only considers quarterly growth rates during the current year, while the Year/Year measure depends on quarterly growth rates in both the current and previous year and puts considerable weight on growth around the turn of the year.

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  • Richard K. Crump & Stefano Eusepi & David O. Lucca & Emanuel Moench, 2014. "Data Insight: Which Growth Rate? It’s a Weighty Subject," Liberty Street Economics 20141229, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87004
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    Keywords

    Summary of Economic Projections; growth rates; Business cycles;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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