GDP data not as bad as portrayed

DEAR SIR — It is amazing how ignorance rules the world. Your headline, “Shock GDP slowdown puts rand on back foot” (May 29), is a case in point. And as a result of all this misrepresentation (I just heard on the radio news talk about this “GDP drop”), the general population will now believe we are in a period of gross domestic product (GDP) contraction, whereas in fact Statistics SA reported growth in GDP of almost 1% a year, according to the way they annualise quarterly growth.

I’m now convinced most economists and all reporters think of the GDP time series as a table of percentage growth numbers. That is assuming they know what a time series is. I could go on at length about the way quarterly numbers are annualised, but that would be quite boring for people who still do not know the difference between “lower growth” and “lower GDP”.

What I’d like to point out is that the base GDP data (without the wizardry of the statisticians) do not look nearly as bad as people are now painting the situation. (My calculations are based on GDP numbers as recorded in the Statistics SA publication P0441 for first quarter 2013, issued this week.)

The first quarter of this year’s GDP is in fact 1.9% higher than the first quarter of last year’s GDP. (Almost 2% growth in the past 12 months.) That is decent growth in economic activity, and no reason to talk about GDP slowdowns. When you consider that the first quarter of last year had two more business days than the first quarter of this year (last year was a leap year, and Good Friday moved into March this year) there is more good news that could have reported.

To talk percentages: the first quarter of this year had 3.1% less working days than the first quarter of last year. If we adjust the output for the first quarter of this year up by just half that discrepancy, we arrive at an economy that would have been 3.5% bigger than a year before. Growth!

This hoo-ha about the alleged “shock GDP slowdown” confirmed my suspicions that the whole capitalist economy is driven by the overreaction of a group of “influential” people who don’t really understand the numbers they are confronted with.

The people who influence economic activity and asset prices in general probably consider a three-month period as long term. They blindly overreact to published data if they think it will have an effect on the profits of their day-trading activities.

Look at our rand-dollar exchange rate: our quarterly economy is at least 1.9% bigger than it was a year ago, but the rand is 25c less valuable against the dollar on the day, almost 10% down in value in the past month, and around 25% down over the past 12 months.

I am not claiming our economy is doing well, or our GDP growth is good. But for goodness’ sake, keep the perspective; do not fall over backwards stone-cold like a baboon that has spotted a snake if you are in fact looking at a common garden hosepipe. Ferdi Kruger Centurion