August 12, 2020
Some folks may have seen articles reporting that the United Kingdom’s economy shrank by 20.4 percent in the second quarter. While this number is accurate, it is reporting the quarterly rate of decline.
We typically report GDP changes as annual rates, which implies taking the quarterly growth rate to the fourth power. In the case of the UK, its second quarter pace of decline would imply a drop of 59.9 percent at an annual rate.
It is worth making this calculation for comparative purposes. Readers may recall that the US economy contracted 32.9 percent in the second quarter. This is an annual rate of decline. The contraction in the UK was actually far worse than the contraction in the United States.