Economic activity has been halted across the country since mid-March, when the COVID-19 outbreak began in the United States, due to stay-at-home orders implemented by state and local governments. As a result, economic output in the United States is predicted to plummet, particularly in the second quarter of 2020. We’ve seen various estimates of extremely negative GDP growth rates, with some as low as 30 percent. According to the Conference Board, real GDP in the United States will fall by 33.3 percent at annual rates in the second quarter. 1 If this projection is correct, the significant reduction in quarterly GDP in the United States will be unparalleled. These figures represent unexplored area, therefore they should be interpreted with caution.
The Bureau of Economic Analysis (BEA) calculates quarterly GDP in the United States, and its growth rate is published as the quarter-on-quarter (QoQ) annualized growth rate. The term QoQ refers to the growth of GDP over the course of two quarters. For example, the percentage change in seasonally adjusted GDP from 2020 Q1 to 2020 Q2 is used to compute the QoQ GDP growth rate for 2020 Q2. The gross quarterly growth rate is then raised to the fourth power, resulting in an annualized QoQ growth rate. 2 As a result, the previously cited forecast of 33.3 percent Q2 GDP growth actually translates to a 9.63 percent loss in second-quarter GDP (compared to the first quarter after seasonal adjustment) ((1 33.3 percent)(1/4) 1 = -9.63 percent). The enormous gap between these two growth figures (33.3 percent and 9.63 percent) is due to annualizing the quarterly rate to a yearly rate, a computation that assumes the current quarter’s growth rate would span the entire year. Current GDP predictions for the third and fourth quarters in the United States, on the other hand, are much more optimistic, implying that this year’s significant drop in GDP will not endure the entire year.
The QoQ annualized rate makes sense as an indicator of yearly economic growth when the economy is functioning smoothly, because the QoQ quarterly growth rate does not vary much from quarter to quarter. However, because we are in a unique economic position in 2020 Q2, it may be easier to look at the non-annualized GDP growth rate for the second quarter (9.63%). Furthermore, the second quarter is yet underway, and with so many unknowns facing the US economy, second-quarter growth projections are likely to be revised as events unfold. As a result, we’ll have to wait a few months to observe the full impact of the government closure on second-quarter GDP in the United States.
What is the GDP growth rate in other COVID-19-affected countries? Some nations, like as China and Italy, had a substantial COVID-19 outbreak before the United States. As a result, their first-quarter GDP should have been impacted more than the United States’ first-quarter GDP. The BEA released an advance estimate of 2020 Q1 U.S. GDP on April 29, which showed a 4.8 percent fall (annualized QoQ rate). 3
The first large-scale outbreak of COVID-19 occurred in China. China began shutting down its economy at the end of January in reaction to the outbreak. As a result, the Chinese economy was severely harmed by the economic shutdown, at least in the second half of Q1 2020. What was the magnitude of the impact on GDP? According to the most recent official data, China’s GDP growth rate in the first quarter was -6.8%, which is a significant drop, especially given the Chinese economy’s rapid growth in recent decades. 4 This number, however, is not comparable to US growth figures because not all nations record GDP growth rates in the same way that the US does. China uses a different method to report GDP growth: the year-on-year (YoY) GDP growth rate, which compares the current quarter’s GDP to the same quarter a year before. As a result, the growth rate is already annualized and does not need to be recalculated.
Calculate the first-quarter QoQ annualized Chinese GDP growth rate to make it comparable. For this calculation, we’ll need real GDP statistics from the first and last quarters of 2020 and 2019, which may be found on the National Bureau of Statistics of China’s website. China’s QoQ GDP growth rate is roughly 10 percent after seasonal adjustment, and the annualized QoQ growth rate is 34.76 percent. This annualized QoQ decrease in Q1 GDP in China is far larger than that in the United States, but it is close to the aforementioned Q2 GDP decline in the United States.
In the first quarter of 2020, Italy also suffered a big epidemic of COVID-19, which began in the middle of February. The Italian government imposed a lockdown on key northern districts in late February, and the lockdown was expanded to the entire country on March 9. As a result, the Italian economic shutdown began earlier than the United States but later than China. Italy released its preliminary GDP estimate for the first quarter on April 30. Two GDP growth rates are mentioned in the press release: 4.8 percent YoY and 4.7 percent QoQ. 5 However, because the latter rate is not annualized, it cannot be directly compared to the US growth rate. The QoQ annualized rate is 17.7%, according to a simple calculation.
In summary, economic shutdowns have resulted in large declines in GDP in China, Italy, and the United States. Countries, on the other hand, publish GDP growth rates in a variety of ways, therefore it’s critical to compare comparable figures across countries to ensure accurate cross-country comparisons.
3 https://www.bea.gov/news/2020/gross-domestic-product-1st-quarter-2020-advance-estimate.
The Federal Reserve Bank of St. Louis will hold a meeting in 2020. The Federal Reserve Bank of St. Louis and the Federal Reserve System do not endorse these ideas.
Is it possible to calculate GDP quarterly?
The data for each quarter is released two months after the final working day of the quarter. With a two-month lag, annual GDP data is announced on May 31. (In India, the financial year runs from April to March.) Quarterly estimates are the first figures to be given. The computed estimates are upgraded to final numbers when new and more accurate data sets become available.
Why is GDP measured every three months?
The GDP growth rate examines the change in a country’s economic production year over year (or quarterly) to determine how fast it is increasing.
What is quarterly expansion?
Quarterly revenue growth is defined as an increase in a company’s sales from one quarter to the next. The current quarter’s sales figures can be compared year over year (e.g., 3Q sales of Year 1 vs. 3Q sales of Year 2) or sequentially (e.g., 3Q sales of Year 1 vs. 3Q sales of Year 2). (3Q sales of Year 1 compared with 4Q sales of Year 1). This informs analysts, investors, and other stakeholders about how a company’s sales are changing over time.
What is a GDP quarter, exactly?
In Q1 of 2021-22, GDP at constant (2011-12) prices is expected to reach 32.38 lakh crore INR, representing a best-ever quarterly GDP growth rate of 20.13 percent over the same quarter the previous year. The year-ago quarter’s GDP growth rate was -24.43 percent, while the previous quarter’s was 1.64 percent. The GDP growth rate in Q1 of FY22 is -9.22% lower than it was in Q1 of FY20, when it was at its lowest point ever.
In the second quarter of 2016-17 and the fourth quarter of FY16, India’s growth surpassed 9% for the first time since 2012-13.
Quarterly GVA at Basic Price at Constant (2011-12) Prices for 2020-21 (Q4) is anticipated to be 30.48 lakh crore, up 18.77 percent over the previous year’s equivalent quarter.
Agriculture and allied, Industry, and Services have GVA growth rates of 4.52 percent, 46.15 percent, and 11.42 percent, respectively. In Q1 of 2021-22, the ‘Construction’ sector grew at the fastest rate of 68.33 percent over Q1 of 2020-21. The ‘Financial, real estate, and professional services’ sector, on the other hand, has experienced the slowest growth rate of 3.69 percent, followed by ‘Agriculture, forestry, and fisheries’ (4.52 percent).
In Q1 of 2021-22, nominal GDP growth, which is a measure of GDP without accounting for inflation, was 31.73 percent. In FY21, the lowest quarter-on-quarter nominal growth rate of -22.29 percent was achieved (Q1).
What are the three methods for calculating GDP?
The value added approach, the income approach (how much is earned as revenue on resources utilized to make items), and the expenditures approach can all be used to calculate GDP (how much is spent on stuff).
Gross Domestic Product
Each year and quarter, the BEA calculates the country’s GDP. Every month, however, new GDP figures are released. Why? Because the BEA estimates GDP three times per quarter. The advance estimate is an early look based on the greatest information available at the time, and it comes roughly a month after the quarter ends. The second and third estimates each include additional source data that was not accessible the month before, resulting in increased accuracy.
More to know
The gross domestic product of the United States is in the trillions of dollars. The term “GDP” is frequently used to refer to a percentage figure. This is the rate at which real GDP changed from the prior quarter or year. To compare different periods, “real” or “chained” GDP data have been adjusted to exclude the impacts of inflation over time.
Estimates of “current-dollar” or “nominal” GDP are based on market prices during the measurement period.
Seasonal adjustments are made to GDP data to exclude the influence of yearly trends like winter weather, holidays, and industry output schedules. This guarantees that the remaining fluctuations in GDP better represent genuine economic activity patterns. The Bureau of Economic Analysis also publishes GDP numbers that are not seasonally adjusted.
Unless otherwise noted, quarterly GDP data are given at annual rates for simplicity of comparison.
GDP by State
The Bureau of Economic Analysis (BEA) calculates the value of products and services produced in each state and the District of Columbia on a quarterly and annual basis. The data includes breakdowns of the contributions of various industries to each of these economies.
GDP by County, Metro, and Other Areas
Annual GDP statistics are given for counties, metropolitan areas, and a few other statistical areas. They include the contributions of 34 industries to the local economy. In December 2019, the BEA released its first official GDP statistics for the nation’s 3,113 counties and county equivalents.
GDP for U.S. Territories
Annual GDP figures, including industry contributions, are issued for American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, and the United States Virgin Islands.
GDP by Industry
These figures, which are published quarterly and annually, quantify each industry’s performance and contributions to the general economy, often known as “value added.” The data also includes gross output, employee compensation, gross operating surplus, and taxes for each industry.
Subtract the new value by one
Subtract one from the number obtained by dividing the end value by the beginning value. You’ll get a decimal value from this stage, which you can use to calculate a percentage.
Use the decimal to find the percentage of annual growth
By moving the decimal two integers to the right, you can use it to represent a % in the last step.
If there is a zero before the number, ignore it and calculate the percentage using the next whole number. Add a zero to the other side of the integer if the decimal is only beside a single number. This is what it would look like: The number 8 would become 80 or 80%. A value that looks like.05 is equal to 5 or 5%.
What is the formula for converting annual growth rate to quarterly growth rate?
You can get the appropriate rate by dividing the annual interest rate by the number of periods when using monthly or quarterly interest rates instead of annual interest rates. For instance, a 12% annual interest rate divided by four periods is a 3% quarterly interest rate.