1/ You& #39;re probably seeing a lot of "Q3 GDP Grows at a Record Pace!!!!!" headlines today

a thread on what that record figure really means
2/ The number you are likely seeing tossed around represents an ANNUALIZED increase of +33%

A more useful figure: Q3 output was about +7.4% higher than Q2 output

So where did the 1st number come from?
3/ That crazy high number shows how much GDP would grow or shrink if that rate was sustained for a full year

annualized figures are helpful when comparing data across historical periods

but can be misleading when looking at short term changes
4/ For example, if you got a $1,000 bonus for the month of October

you probably wouldn& #39;t say "I got a $12,000 raise on an annualized basis!" cuz you know it& #39;s not actually a sustained bonus

same for GDP numbers
5/ The economy didn& #39;t actually grow by nearly a third in three months

but the annualized formula is always going to paint a more optimistic picture when GDP grows

ESPECIALLY after the massive contraction in Q2
6/ For a little context the economy today is still -3.5% smaller than it was at the end of last year

and for even more context, -3.5% is roughly the same level the economy was operating at during the worst of the last financial crisis
7/ You& #39;ll see a lot of that +33% number today

but take it with an annualized grain of salt
You can follow @MorningBrew.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled: